Do changes in cost-sharing have an impact on the behaviour of students and higher education institutions? : evidence from nine case studies. Volume II, National reports.
Date: 2015-06-22
Institutions: Directorate-General for Education, Youth, Sport and Culture
Subjects: case study, comparative education, education costs, education policy, educational institution, educational system, higher education, private investment, public financing, report, school fees, student

Do changes in cost-sharing have an impact 
on the behaviour of students 
and higher education institutions? 

Evidence from  
nine case studies 

VOLUME II: 
NATIONAL REPORTS 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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DOI 10.2766/73985 

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Contract n° EAC-2012-0529 

A report prepared by: 

Dominic Orr 
Johannes Wespel 

      Alex Usher 

This document has been prepared for the European Commission. However, it reflects the views 
only of the authors, and the Commission cannot be held responsible for any use which may be 
made of the information contained therein 

Le présent document a été élaboré pour la Commission européenne. Toutefois, les avis qui y sont 
exprimés sont ceux des seuls auteurs et la Commission ne saurait être tenue pour responsable de 
l’utilisation qui serait faite des informations figurant dans le document. 

Dieses Dokument wurde im Auftrag der Europäischen Kommission erstellt. Die Verantwortung 
für den Inhalt tragen jedoch allein die Verfasser; die Kommission haftet nicht für die weitere 
Verwendung der darin enthaltenen Angaben. 

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Table of Contents 

Austria ..............................................................................................................1 

Acknowledgements .................................................................................................................. 2 

1. 

Introduction ...................................................................................................................... 3 

2.  Hypothesis A: As Private Funding Increases, Institutional Revenue Increases ................ 15 

3.  Hypothesis B: As the Incentives to earn Private Funding Increase, Institutions become 

more Responsive to User Demand .................................................................................. 25 

4.  Hypothesis C: Increasing Private Funding has a Negative Effect on Participation ........... 35 

5.  Hypothesis D: Increasing Private Funding affects Student Choice of how or what to Study
 ........................................................................................................................................ 49 

6.  Conclusion ....................................................................................................................... 55 

References .............................................................................................................................. 57 

Appendix: List of Interviewed Experts .................................................................................... 60 

Canada ............................................................................................................ 62 

1. 

Introduction .................................................................................................................... 63 

2.  Hypothesis A: As Private Funding Increases, Institutional Revenue Increases ................ 74 

3.  Hypothesis B: As the Incentives to earn Private Funding Increase, Institutions become 

more Responsive to Student Demand ............................................................................. 86 

4.  Hypothesis C: Increasing Private Funding has a Negative Effect on Participation ........... 96 

5.  Hypothesis D: Increasing Private Funding affects Student Choice of how or what to Study
 ...................................................................................................................................... 122 

6.  Conclusion ..................................................................................................................... 128 

References ............................................................................................................................ 129 

Appendix: List of Interviewed Experts .................................................................................. 131 

England ......................................................................................................... 132 

Acknowledgements .............................................................................................................. 133 

1. 

INTRODUCTION .................................................................................................................. 134 

2.  HYPOTHESIS A: AS PRIVATE FUNDING INCREASES, INSTITUTIONAL REVENUE INCREASES .................. 143 

3.  HYPOTHESIS B: AS THE INCENTIVES TO EARN PRIVATE FUNDING INCREASE, INSTITUTIONS BECOME MORE 
RESPONSIVE TO STUDENT DEMAND ....................................................................................... 150 

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4.  HYPOTHESIS C: INCREASING PRIVATE FUNDING HAS A NEGATIVE EFFECT ON PARTICIPATION ............ 160 

5.  HYPOTHESIS D: INCREASING PRIVATE FUNDING AFFECTS STUDENT CHOICE OF HOW OR WHAT TO STUDY

 ...................................................................................................................................... 179 

6.  CONCLUSION ..................................................................................................................... 185 

References ............................................................................................................................ 186 

Finland .......................................................................................................... 188 

ACKNOWLEDGEMENTS ............................................................................................................... 189 

1. 

INTRODUCTION .................................................................................................................. 190 

2.  HYPOTHESIS A: AS PRIVATE FUNDING INCREASES, INSTITUTIONAL REVENUE INCREASES .................. 202 

3.  HYPOTHESIS B: AS THE INCENTIVES TO EARN PRIVATE FUNDING INCREASE, INSTITUTIONS BECOME MORE 
RESPONSIVE TO USER DEMAND ............................................................................................ 211 

4.  HYPOTHESIS C: INCREASING PRIVATE FUNDING HAS A NEGATIVE EFFECT ON PARTICIPATION ............ 220 

5.  HYPOTHESIS D: INCREASING PRIVATE FUNDING AFFECTS STUDENT CHOICE OF HOW OR WHAT TO STUDY

 ...................................................................................................................................... 235 

6.  CONCLUSION ..................................................................................................................... 243 

References ............................................................................................................................ 244 

APPENDIX: LIST OF INTERVIEWED EXPERTS ..................................................................................... 245 

Germany ....................................................................................................... 246 

1. 

INTRODUCTION .................................................................................................................. 247 

2.  HYPOTHESIS A: AS PRIVATE FUNDING INCREASES, INSTITUTIONAL REVENUE INCREASES .................. 264 

3.  HYPOTHESIS B: AS THE INCENTIVES TO EARN PRIVATE FUNDING INCREASE, INSTITUTIONS BECOME MORE 
RESPONSIVE TO USER DEMAND ............................................................................................ 283 

4.  HYPOTHESIS C: INCREASING PRIVATE FUNDING HAS A NEGATIVE EFFECT ON PARTICIPATION ............ 300 

5.  HYPOTHESIS D: INCREASING PRIVATE FUNDING AFFECTS STUDENT CHOICE OF HOW OR WHAT TO STUDY

 ...................................................................................................................................... 319 

6.  CONCLUSION ..................................................................................................................... 326 

References ............................................................................................................................ 328 

APPENDIX: LIST OF INTERVIEWED EXPERTS ..................................................................................... 335 

Hungary......................................................................................................... 337 

ACKNOWLEDGEMENTS ............................................................................................................... 338 

1. 

INTRODUCTION .................................................................................................................. 339 

2.  HYPOTHESIS A: AS PRIVATE FUNDING INCREASES, INSTITUTIONAL REVENUE INCREASES .................. 351 

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3.  HYPOTHESIS B: AS THE INCENTIVES TO EARN PRIVATE FUNDING INCREASE, INSTITUTIONS BECOME MORE 
RESPONSIVE TO USER DEMAND ............................................................................................ 363 

4.  HYPOTHESIS C: INCREASING PRIVATE FUNDING HAS A NEGATIVE EFFECT ON PARTICIPATION ............ 376 

5.  HYPOTHESIS D: INCREASING PRIVATE FUNDING AFFECTS STUDENT CHOICE OF HOW OR WHAT TO STUDY

 ...................................................................................................................................... 384 

6.  CONCLUSION ..................................................................................................................... 389 

REFERENCES ............................................................................................................................. 392 

APPENDIX: LIST OF INTERVIEWED EXPERTS ..................................................................................... 394 

South Korea ................................................................................................... 395 

Acknowledgements .............................................................................................................. 396 

1. 

INTRODUCTION .................................................................................................................. 397 

2.  HYPOTHESIS A: AS PRIVATE FUNDING INCREASES, INSTITUTIONAL REVENUE INCREASES .................. 405 

3.  HYPOTHESIS B: AS THE INCENTIVES TO EARN PRIVATE FUNDING INCREASE, INSTITUTIONS BECOME MORE 
RESPONSIVE TO STUDENT DEMAND ....................................................................................... 413 

4.  HYPOTHESIS C: INCREASING PRIVATE FUNDING HAS A NEGATIVE EFFECT ON PARTICIPATION ............ 419 

5.  HYPOTHESIS D: INCREASING PRIVATE FUNDING AFFECTS STUDENT CHOICE OF HOW OR WHAT TO STUDY

 ...................................................................................................................................... 431 

6.  CONCLUSION ..................................................................................................................... 433 

REFERENCES ............................................................................................................................. 434 

Poland ........................................................................................................... 435 

Acknowledgements .............................................................................................................. 436 

1. 

INTRODUCTION .................................................................................................................. 437 

2.  HYPOTHESIS A: AS PRIVATE FUNDING INCREASES, INSTITUTIONAL REVENUE INCREASES .................. 444 

3.  HYPOTHESIS B: AS THE INCENTIVES TO EARN PRIVATE FUNDING INCREASE, INSTITUTIONS BECOME MORE 
RESPONSIVE TO STUDENT DEMAND ....................................................................................... 454 

4.  HYPOTHESIS C: INCREASING PRIVATE FUNDING HAS A NEGATIVE EFFECT ON PARTICIPATION ............ 461 

5.  HYPOTHESIS D: INCREASING PRIVATE FUNDING AFFECTS STUDENT CHOICE OF HOW OR WHAT TO STUDY

 ...................................................................................................................................... 475 

6.  CONCLUSION ..................................................................................................................... 478 

REFERENCES ............................................................................................................................. 479 

Portugal ........................................................................................................ 480 

Acknowledgements .............................................................................................................. 481 

1. 

INTRODUCTION .................................................................................................................. 482 

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2.  HYPOTHESIS A: AS PRIVATE FUNDING INCREASES, INSTITUTIONAL REVENUE INCREASES .................. 489 

3.  HYPOTHESIS B: AS THE INCENTIVES TO EARN PRIVATE FUNDING INCREASE, INSTITUTIONS BECOME MORE 
RESPONSIVE TO STUDENT DEMAND ....................................................................................... 497 

4.  HYPOTHESIS C: INCREASING PRIVATE FUNDING HAS A NEGATIVE EFFECT ON PARTICIPATION ............ 505 

5.  HYPOTHESIS D: INCREASING PRIVATE FUNDING AFFECTS STUDENT CHOICE OF HOW OR WHAT TO STUDY

 ...................................................................................................................................... 516 

6.  CONCLUSION ..................................................................................................................... 520 

REFERENCES ............................................................................................................................. 521 

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National Report for Austria 

AUSTRIA  

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National Report for Austria 

ACKNOWLEDGEMENTS 

The authors would like to acknowledge the support in data research and interpretation provided 
by the following persons: 

  Mag. Martin Unger, Senior Researcher, Institute for Advanced Studies (IHS), Vienna  
  Mag. Jakob Hartl, Researcher, Institute for Advanced Studies (IHS), Vienna. 

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National Report for Austria 

1.  INTRODUCTION 

1.1  Overview of Higher Education in Austria  

Austria  has  a  population  of  about  8.5  million.  As  a  federal  state  (Bund),  it  consists  of  nine 
autonomous  states  (Länder),  with  the  federal  state  assuming  most  responsibilities  in  higher 
education politics. Austria was chosen for this study as a representative of a Western European 
country with a dominant public sector and  with an economic performance in the upper third of 
the EU member states. 

The  present  Austrian  higher  education  system  consists  of  three  main  types  of  institutions: 
universities,  universities  of  applied  science  (hereinafter  Fachhochschulen)  and  university 
colleges of teacher education (Pädagogische Hochschulen). The latter were upgraded from post-
secondary to tertiary institutions in 2007. In the academic year of 2009/2010 there were a total of 
320,000 enrolments in Austrian higher education institutions (HEIs).1 

There are 22 full universities in the public sector of Austrian higher education, in which roughly 
274,000 students were enrolled in 2009/2010. Since the early 2000s the approach to regulating 
the higher education system has changed. In particular, direct public control of universities was 
replaced by a governance approach based on giving incentives, setting standards and monitoring, 
while  at  the  same  time  encouraging  universities  to  make  full  use  of  the  autonomy  granted  to 
them  by  law  in  2002.  The  state,  represented  by  the  Ministry  of  Science  and  Research,  has 
retained a statutory supervisory role, while operation is the responsibility of the universities. The 
Universities Act of 2002 transferred the former governmental accounting system to a commercial 
accounting  system  and  gave  universities  the  authority  to  decide  on  budgetary  matters 
independently, to make investments and to establish companies. In addition, new university staff 
are no longer civil servants but are employed directly by the university. This is, however, not the 
case  for  pre-existing  contracts,  where  the  staff  remained  civil  servants  and  their  employment 
conditions subject to federal law. The Universities Act of 2002 was considered a milestone in the 
change  of  the  Austrian  university  system,  away  from  direct  ministerial  steering  and  towards  a 
decentralised and deregulated mode of governance (Lanzendorf 2006). 

The  Universities  of  Applied  Science  (Fachhochschulen)  were  established  in  1994  and  began 
offering Bachelor and Master courses in 2003. They are not authorized to offer doctoral degree 
programmes.  There  are  currently  21  institutions  offering  Fachhochschul-study  programmes, 
most  of  which  were  founded  or  supported  by  their  respective  Land  as  a  regional  political 
measure. Each Land has at least one Fachhochschule, with the bigger Länder having 3 (Tirol), 4 
(Lower Austria) and 6 (Vienna), respectively. The total number of students enrolled in Austrian 
Fachhochschulen  was  36,900  in  2009/2010,  which  is  around  11%  of  all  students  (Statistik 
Austria, 2011). 

1 The number of students in the system is somewhat smaller because students enrolled in more than one programme 
are counted several times. 

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In contrast to universities, degree programmes at Fachhochschulen have a stronger regional basis 
with a more vocational focus. Many of the programmes can also be studied while working at the 
same time. The official status of Fachhochschulen is that of organisations under private law, and 
they  may  be  run  by  public  or  private  entities.2  Their  programmes  have  been  accredited  since 
2004  by  the  Austrian  Fachhochschul-Council  (FHR).  In  2012,  the  FHR  was  merged  with  the 
Agency for Quality Assurance and Accreditation Austria, an organisation which is also in charge 
of accrediting private HEIs. 

The Fachhochschulen are financed by a mixed system based on federal funding for study places 
and the funding of capital and other expenses by either the providing body of the HEI or regional 
entities. Since 2001, Fachhochschulen have been allowed to charge tuition fees, but only at the 
level  set  by  the  Federal  government.  The  maximum  fee  is 363  euros  per  semester  for  students 
with Austrian or other EU citizenship. Five Fachhochschulen did not charge tuition fees in 2014. 
Together  they  enrol  about  one  third  of  all  Austrian  Fachhochschul-students.  Recently, 
Fachhochschulen  have  gained  access  to  public  research  funding.  This  has  caused  business 
representatives  to  begin  lobbying  for  a  new  type  of  HEI,  which  has  a  closer  focus  on 
vocationally-orientated training.  

There  are  nine  public  university  colleges  of  teacher  education,  which  focus  only  on  teacher 
training and are supervised directly by the Ministry of Education, Arts and Culture. Additionally 
there  are  five  private  colleges  of  teacher  education,  and  three  religious  institutions  which  train 
teachers.  In  total,  15,783  students  were  enrolled  in  university  colleges  of  teacher  education  in 
2009/2010.  

Private  universities  have  existed  since  2000.  In  2012,  there  were  12  accredited  private 
universities, covering a variety of disciplines such as management, health, psychotherapy, peace 
studies  and  the  creative  industries.  Over  6,000  students  were  enrolled  in  these  HEIs  in 
2010/2011.  Their  size  varies  from  70  students at  the  European  Peace  University  (accredited  in 
2010/2011) to 1,500 students at the Private University of Health Sciences, Medical Informatics 
and  Technology  (UMIT)  in  Hall,  Tyrol.  Private  HEIs  must  be  accredited  by  the  independent 
Agency for Quality Assurance and Accreditation Austria. Private HEIs may not receive federal 
funding, but can receive public funding from the regional government. 

All HEIs are obliged by law to set up an internal quality assurance system: public universities 
through the Universities Act of 2002; Fachhochschulen by the Fachhochschulen Studies Act of 
1993; private universities by the University Accreditation Act of 1999, and university colleges of 
teacher education by the Higher Education Act of 2005. 

In  a  study  on  university  autonomy  conducted  by  the  European  University  Association  (EUA), 
Austrian  universities  are  rated  as  highly  autonomous  in  terms  of  internal  organisation  and 
staffing  (EUA,  n.d.-a).  Concerning  admission,  the  study  notes  that  autonomy  is  restricted  by 
universities’ inability to determine student numbers and admission procedures at Bachelor level. 

2 Even though Fachhochschulen are organisations under private law, they are treated as public HEIs in this report 
because  their  funders  /  providers  are  overwhelmingly  public  entities.  The  same  goes  for  colleges  of  teacher 
education: Although some of them are owned by the Catholic church, the main funding body for all of these colleges 
is the state. 

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Where financial autonomy is concerned, a sharp difference is observable between autonomy in 
internal  financial  management,  which  is  rated  high,  and  autonomy  to  generate  private  funds, 
which is rated low due to the prohibition of tuition fees (EUA, n.d.-a). 

Austria is of particular interest to this study insofar as it saw two major discontinuities in cost-
sharing  policy  in  the  period  of  investigation:  The  introduction  of  general  tuition  fees  in  the 
university  sector  in  2001,  and  their  withdrawal  in  2009.  Both  of  these  junctures  will  be 
investigated  concerning  their  effects  on  the  institutional  and  the  student  dimension  of  cost-
sharing. 

1.2  Key Higher Education Stakeholders 

The  Federal  Ministry  of  Science  and  Research  (Bundesministerium  für  Wissenschaft  und 
Forschung,  BMWF)  has  the  oversight  over  universities  and  Fachhochschulen.  Besides 
legislative  responsibility,  the  BMWF  cooperates  with  the  universities  compiling  individual 
performance agreements between each university and the ministry, accounting for financial core 
funding  and  evaluating  the  outcomes.  In  the  same  vein,  the  BMWF  also  supervises 
Fachhochschulen, and establishes regulatory and structural policies in sector plans.3 The BMWF 
cooperates with the Federal Ministry for Education, the Arts and Culture (Bundesministerium für 
Unterricht,  Kunst und  Kultur,  BMUKK),  which  supervises  secondary  education  as  well  as  the 
university colleges of teacher education. 

The national chamber of commerce (Wirtschaftskammer Österreich, WKÖ) is a corporate body 
that monitors the actions of the nine autonomous chambers of commerce of the states. The WKÖ 
is  funded  through  obligatory  contributions  paid  by  every  company  and  funds  several 
Fachhochschulen in cooperation with regional chambers of commerce. The Vienna Chamber of 
Commerce  and  the  local  Fund  of  Vienna  merchants  (Fonds  der  Wiener  Kaufmannschaft) 
cooperate as funders  of one of the bigger Fachhochschulen in Austria, the  Fachhochschule of 
Vienna (2,400 enrolments in 2013). The Fachhochschule Salzburg (2,200 enrolments in 2013) is 
owned  by  the  regional  chamber  of  commerce  (of  Salzburg)  and  the  chamber  of  employees 
(Arbeiterkammer Salzburg). 

The  central  authority  for  quality  assurance  is  the  Agency  for  Quality  Assurance  and 
Accreditation  Austria,  which  was  established  in  2012,  integrating  the  three  existing  agencies 
responsible for quality assurance in different sectors: the Austrian Accreditation Council, which 
was  responsible  for  quality  assurance  in  the  private  sector;  the  FH  Council,  which  was 
responsible  for  quality  assurance  in  the  Fachhochschul-sector;  and  the  Austrian  Agency  for 
Quality  Assurance  (AQA),  an  independent  institution  for  quality  assurance,  evaluation  and 
certification for the entire higher education sector. 

The different sectors are represented by the University Rectors’ Conference Universities Austria 
(uniko),  the  Association  of  Universities  of  Applied  Sciences  in  Austria  (FHK),  the  Rectors’ 

3 3 An example would be the Programme for Fachhochschulen 2010/11 - 2012/13 aiming to consolidate the sector 
and to set general priorities, see Österreichischer Wissenschaftsrat (2012) 

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National Report for Austria 

Conference  of  Austrian  Universities of  Education  (RÖPH) and the  Austrian  Private  University 
Conference (ÖPUK), respectively. 

The Austrian Study Support Authority (Studienbeihilfebehörde), a service facility of the BMWF, 
provides  study  aid  based  on  socio-economic  criteria  (such  as  revenues  of  students’  parents, 
number of siblings and marital status) and students’ performance.  

(Österreichische  Hochschülerinnen-  und 
The  Austrian  National  Union  of  Students 
Hochschülerschaft,  ÖH)  represents  all  students  in  public  universities,  Fachhochschulen  (since 
2007) and colleges of teacher education. It is the general students' representative body in Austria 
and serves as the students' government by federal law. Its function is thus comparable to that of 
the Austrian Economic Chamber for the Austrian business community. Membership in the ÖH is 
compulsory  for  every  student  in  the  public  higher  education  sector  in  Austria,  including  PhD 
candidates. The ÖH has the legal responsibility to support aspiring students in choosing a study 
programme and during the application phase (BMWF, 2011, p.179). 

1.3  How Governments Fund Institutions 

Universities 

Up  until  the  Universities  act  of 2002  (implemented in  2004), university  funding  was  based  on 
input-oriented line-item budgeting. Since gaining autonomy in 2004, public universities receive 
three  year  global  grants  to  cover  their  main  costs,  representing  around  80%  of  the  public 
university budget. The budget is allocated based on target and performance agreements between 
the Ministry for Science and Research and the individual universities. These agreements identify 
individual targets and determine scopes and deadlines for goal achievement as well as measures 
to be taken if goals are not achieved. The budget reflects institutions’ individual cost structures, 
which  are  influenced  among  other  things  by  the  share  of  staff  with  pre-existing  civil  service 
contracts, and building rental costs, both of which were direct costs to the ministry prior to 2002.  

Until  2012,  the  formula-based  part  of  the  budget  made  up  20%  of  the  federal  institutional 
funding  and  was  allocated  based  on performance  on  eleven  different  indicators  in the  areas  of 
teaching  and  learning,  research  and  societal  goals.  A  recent  evaluation  of  the  formula-based 
budget (Unger, Dünser, Thaler, & Laimer, 2011, cit. after Österreichischer Rechnungshof, 2012) 
judged it to be ineffective as a steering instrument, since the effect of performance on individual 
indicators to the total budget was lacking in transparency for most universities.  

For the budgeting period 2013-2015, the overall budget of Austrian universities was augmented 
by nearly  one billion euros. Approximately one third of these funds are being used to increase 
institutional  core  funding,  and  almost  half  is  allocated  based  on  universities’  performance  in 
teaching,  and,  to  a  lesser  degree,  in  research.  An  amount  of  63  million  euros  is  set  aside  to 
incentivise  cooperation  among  universities  and  between  universities  and  other  organisations, 
including business and industry. The BMWF acts as a co-funder, contributing up to one third of 
the cost of cooperative projects.  

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With  the  change  of  government  in  2000  the  coalition  of  the  Austrian  People's  Party 
(Österreichische  Volkspartei,  ÖVP)  and  the  Freedom  Party  of  Austria  (Freiheitliche  Partei 
Österreichs,  FPÖ)  introduced  tuition  fees  of  363  euros  per  semester  for  universities,  with  no 
distinction between study programmes. The regulation of who pays fees was changed in the late 
2000s, as described below. Tuition fees were collected by all Austrian universities from 2001 to 
2009.  Fachhochschulen  have  been  allowed  to  decide  autonomously  whether  to  charge  tuition 
fees (of 363 euros per semester) or not since 2001. University colleges of teacher education do 
not charge fees. 

In  summary,  the  reforms  to  university  funding  since  the  early  2000s  have  had  the  aim  of 
changing the balance between state supervision and funding, on the one  hand, and encouraging 
‘entrepreneurial’ behaviour of universities, on the other. However, this change was tempered by 
an ongoing state control. 

Fachhochschulen 

A mixed-funding system applies to Fachhochschulen: Normed costs for study places are defined 
by field of study, and the numbers of study places is negotiated between the Fachhochschule and 
the BMWF. The Federal State then funds 90% of the cost so defined. The remaining funds must 
be  provided  from  elsewhere.  At  the  outset,  business  and  industry,  as  the  main  employers  of 
graduates  of  Fachhochschulen,  were  envisaged  as  contributors,  but  in  reality  it  is  mainly  the 
the  additional  funding  (see  Österreichischer 
regions  and  municipalities 
Wissenschaftsrat,  2012,  p.  34).  As  a  result,  the  regions  and  municipalities  have  established 
themselves  as  actors  in  the  Austrian  HEI  system  through  their  responsibilities  for  the 
Fachhochschul-sector.  Fachhochschulen  are  not  limited  in  the  number  of  students  they  can 
accept, but capacities beyond what is negotiated with the BMWF or study programmes without 
accreditation must be self-financing.  

that  provide 

The precise financing structure of Fachhochschulen in Austria varies due to regional differences 
and  variation  in  the  cost  structures  of  different  study  programmes.  A  report  from  2010  by  the 
Austrian Court of Audit (Österreichischer Rechnungshof, 2010, p. 149) showed that the standard 
study costs for the academic year 2005/2006 covered much less than 90% of the actual costs in 
many cases, and in all cases for technical study programmes. On the basis of this information, 
the Austrian Court of Audit recommended an increase to the normed costs for subsequent years. 
One  of  the  problems,  which  also  affects  this  report,  is  that  there  is  no  unified  financial 
monitoring system for the Fachhochschulen, which leads to incomplete data on their exact costs. 

1.4  History of Cost-Sharing 

Tuition fee policy 

The  two  main  political  parties  in  Austria,  the  Austrian  People's  Party  (Österreichische 
Volkspartei,  ÖVP)  and  the  Social  Democratic  Party  (Sozialdemokratische  Partei  Österreichs, 
SPÖ), have different positions on tuition fee policy. 

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With a change of government in 2000 the coalition of the ÖVP and the Freedom Party of Austria 
(Freiheitliche  Partei  Österreichs,  FPÖ)  introduced  tuition  fees  of  363  euros  per  semester  for 
universities with no distinction by study programmes.4 This standard tuition fee was doubled for 
non-EEA students, with exemptions for students from certain countries. The official policy goals 
were to reduce drop-out rates and time to completion. However, the overriding aim in the first 
two  years  was  to  reduce  public  expenditures  during  a  time  of  fiscal  restraint;  hence  the  fees 
collected were passed on to the Federal Ministry of Finance for the first two years. Beginning in 
2003,  universities  retained  the  fees  as  part  of  their  total  income.  The  spending  procedure 
specified  in  the  University  Act  of  2002  determined  that  the  university  senate  make  a  list  of 
proposals  on  how  fees  should  be  spent  in  each  academic  year,  and  that  subsequently  students 
vote for one proposal. Improvements in teaching and learning conditions were usually among the 
primary measures chosen. 

Following  a  political  change  to  the  leadership  of  government  in  2007,  the  Social  Democratic 
Party became involved in a debate on the  abolition of tuition fees. The result was that the new 
regulation  waived  fees  for  most  students  (only  around  15%  of  students  still  paid  fees).  The 
groups who were still required to pay fees were students from outside the EU and those who had 
remained  students  for  longer  than  the  prescribed  duration plus  two  tolerance  semesters,  unless 
certain additional criteria (such as exceeding a certain income threshold, supervision of children, 
illness)  were  fulfilled.  Given  the  devolution  of  many  responsibilities  to  the  universities,  the 
question  of  whether  the  Federal  state  had  the  jurisdiction  to  make  and  enforce  this  policy 
emerged. Therefore, following complaints of unconstitutionality, some universities reintroduced 
tuition fees of 363  euros per semester in 2013. In July 2013, the Austrian Constitutional Court 
decided  that  these  ‘autonomous’  fees  (as  they  were  called)  were  unconstitutional.  As  a 
consequence, the universities concerned were forced to return these fees to their students. 

In  contrast  to the universities,  Fachhochschulen could independently  decide  whether  to  charge 
fees  subsequent  to  a  resolution  of  the  Austrian  National  Parliament  in  2000.  In  practice  the 
decision about whether to charge fees is made by the provider, i.e. mostly the states in which the 
Fachhochschulen  are  located.  The  abolition  of  fees  in  2008  concerned  only  universities,  not 
Fachhochschulen. 

If  either  universities  or  Fachhochschulen  offer  continuing  education  courses  in  specialist  areas 
(e.g. international mining engineer, generic management or migration management), the costs for 
these  courses  must  be  self-financed.  A  report  by  the  Austrian  Court  of  Audit  showed  that 
participation in such courses had been growing (5% of all students in 2006, 6% in 2010) and that 
the  three  universities  covered  by  the  audit  managed  to  earn  a  small  surplus  for  their  courses 
(Österreichischer  Rechnungshof,  2011).One  expert  interviewed  for  this  study  on  the  topic  of 
continuing education commented that although a general trend towards more such programmes 
was visible in Austria, it was unlikely that any Austrian university was going to invest into this 
segment  in  order  to  generate  additional  revenues  with  which  to  support  other  activities. 
According to the expert, a more realistic financial goal for those fee-paying programmes was to 
organise them in a way that makes them financially self-sustaining. 

4 Fees had to be paid only once per student, even if he/she was enrolled in several study programmes. 

8 | P a g e  

                                                 
National Report for Austria 

Study aid policy 

The financial support provided by the Ministry of Science and Research (BMWF) can be divided 
in  direct  and  indirect  payments.  Direct  payments  are  provided  to  the  students  themselves  and 
include  study  grants,  travel  allowances,  support  of  study  periods  abroad,  and  other  types  of 
support.  The  key  agency  providing  direct  support  is  the  Austrian  Study  Support  Authority 
(Studienbeihilfenbehörde).  Indirect  payments,  on  the  other  hand,  are  allocated  to  students’ 
parents or third parties and cover family allowances, students’ health and accident insurance or 
come in the form of subsidies to university cafeterias and student accommodation. This support 
system has been in existence since the early 1960s, but has been consolidated and harmonised in 
the 1990s. 

According to the Student Support Act public grants provided by the BMWF can be claimed by 
all  Bachelor,  Master  and  Diploma  students  at  both  public  and  private  universities  and 
Fachhochschulen. The grants are tax-free. The recipients of study support are selected based on a 
combination  of  means  testing  (parent  and  student  income)  and  merit  (student  performance, 
complying with minimum legal study periods). Applicants generally have to be younger than 30 
on  commencements  of  their  studies.  In  2008/2009,  17.6%  of  all  students  received  public 
financial aid or a scholarship from the Federal State.  

There were several reforms of the Student Support Act after it was first introduced in 1992. As a 
first  step  the  Student  Support  Act  increased  the  individual  amount  of  financial  support  for  the 
student by about 12%. The following reform aimed to widen the group of recipients of benefits. 
Both measures led to an increase in financial support for students especially at Fachhochschulen. 
In 2008/2009, those students that received grants at universities received an average amount of 
4,281 euros of public support per year; at Fachhochschulen the average amount was 4,554 euros.  

Another aim of the reformed Student Support Act was to improve the support for students with 
special needs and with children. Whilst some disabled students received 366 euros of additional 
support per semester in 2007/2008, the amount rose to 417 euros in 2008/2009, an increase of 
13.9%.  In  the  same  period  of  time  the  additional  support  handed  out  to  students  with  children 
increased by 7.1% from 1,650 to 1,774 euros per semester (BMWF, 2010, p.19). 

Students  in  the  final  stage  of  their  degree  course  may  apply  for  an  end-of-studies  grant  of  an 
amount  between  600  and  1,040  euros  a  month  for  a  maximum  period  of  eighteen  months, 
awarded by the Austrian Study Grant Authority. A total of around 300 end-of-studies grants are 
granted annually. 

Students paying tuition fees can apply for a bank loan for which the BMWF covers a part of the 
interest rate. The loan is only supposed to cover tuition fees and is available to all students who 
are under 35 years of age before they start their first studies. Take-up was low from the start in 
2001.5. In 2009, only 437 students benefited from the BMWF taking on a part of the interest rate 
for such private bank loans (BMWF 2010, p. 14).  

5 Social Survey 2002 (p. 198) reports that in 2002 only 0.5% of students made use of this option. 

9 | P a g e  

                                                 
National Report for Austria 

Another  attempt  by  the  Federal  State  to  lift  financial  burdens  for  students  is  to  provide  tax 
benefits to students’ parents. If a student leaves his or her home in order to pursue studies in a 
different location, the parents are entitled to a tax allowance of 110 euros per month  (provided 
that there is no alternative training facility in the vicinity within a radius of 80 kilometres or the 
time spent traveling in one direction is not more than one hour).  

Policies designed to increase private investment in higher education 

In the Austrian higher education system, an important change aiming at higher shares of private 
investments  was 
in  1994. 
Fachhochschulen  were  designed  to  be  funded  partly  by  private  business  and industry.  Equally 
relevant was the passing of the New Universities Act in 2002, which opened new opportunities 
for external fundraising and sponsoring in public universities. 

the  Fachhochschul-sector  starting 

the  establishment  of 

Another  cost-sharing-related  reform  was  the  passing  of  the  Danube  University  Act  (DUK-
Gesetz) in 2004, making the Danube University Krems, formerly a ‘university centre’, equal to a 
full university with the right to appoint professors autonomously. The peculiarity of the Danube 
University Krems is that it specialises in continuing education, and that all teaching programmes 
are fully financed through tuition fees – a financing mode completely different from other public 
universities in Austria. 

In  the  realm  of  university  research,  there  have  been  several  national  funding  programmes 
through  which  cooperation  with  private  enterprises  have  been  supported  during  the  period  of 
investigation.  A  particularly  active  authority  in  this  area  is  the  Austrian  Research  Promotion 
Agency (Österreichische Forschungsfördergesellschaft, FFG), an organisation supervised by the 
Federal  Ministry  for  Economic  Affairs.  The  Agency  administrates  several  lines  of  funding  in 
which cooperative projects between public research institutions and private business and industry 
are  promoted.  One  important  programme  in  the  past  was  called  Kplus  (1998-2011).  This 
programme “has played a decisive role in shaping Austria's R&D community in the 1990ies and 
beyond”  according  to  ERAWATCH  (ERAWATCH,  n.d.).  Its  successor,  the  COMET 
programme (Competence Centers for Excellence Technologies), was launched in 2012. 

A  novel  type  of  research  institution  was  founded  in  2009:  the  Institute  of  Science  and 
Technology Austria (IST Austria) situated north of Vienna. The institute’s mission is to conduct 
internationally  excellent  research  in  a  variety  of  subjects,  mostly  connected  to  science, 
technology,  engineering,  mathematics  (STEM)  and  life  sciences.  The  institute  only  offers 
teaching  programmes  for  doctoral  candidates.  The  IST  is  relevant  in  terms  of  cost-sharing 
because,  although  its  institutional  funding  is  public,  it  has  been  performing  well  in  attracting 
private funds via donations (IST Austria, n.d.). 

In  2012,  a  new  programme  called 
‘Higher  Education  Area  Structural  Fund’ 
(Hochschulraumstrukturmittel)  was  launched  by  the  federal  government.  It  aims  to  foster 
cooperation between HEIs, but also between individual HEIs and the business sector, mostly by 
providing  public  matching  funds  for  contributions  acquired  from  private  stakeholders  (e.g. 
donors, funders of research projects). The programme has a limited duration (2013-2015).  

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National Report for Austria 

1.5  History of Enrolment 

Regulation of enrolment 

The  enrolment  procedure  in  Austria’s  higher  education  system  has  been  discussed  for  many 
years,  since  its  openness  makes  the  size  of  the  system  difficult  to  control.  While 
Fachhochschulen and university colleges of teacher education may select students, universities 
are  constitutionally  obliged  to  accept  every  student  having  achieved  the  formal  academic 
qualification  from  upper  secondary  schooling  called  the  Matura.  This  applies  to  Bachelor  and 
Master  programmes.  It  means  that,  in  most  cases,  aspiring  students  can  simply  register  for  a 
study programme  at the start of  the semester. Only a  limited number of study programmes  are 
able  to  set  formal  capacity  constraints  to  the  number  of  students,  which  demand  an  entrance 
examination from applicants. These programmes tend to be in the fields of arts, sports, medicine 
or psychology, which often set an entrance examination (Eurydice, 2009).  

The principle of open access has fuelled a large increase in the number of students and has led to 
questions of how to maintain quality of provision in such a system (Döbert, Döbrich, von Kopp, 
& Mitter, 2001). 

A recent attempt to regulate the size of the higher education system has been the introduction of 
an induction and orientation phase in the first year of university studies (STEOP) in 2011. This 
phase  has  the  purpose  of  assuring  both  the  motivation  and  the  academic  ability  of  a  student. 
Students  that  fail  to  accumulate  the  relevant  credit  points  in  their  first  year  of  studies  have  to 
leave their programme and cannot re-register for this specific programme at the university again. 
STEOP has been criticized by student representatives for causing unreasonable stress on students 
and  being  an  unfair  method  of  selecting  students  ((Österreichische  HochschülerInnenschaft, 
2012).  In yet another attempt to regulate access, universities were allowed to conduct entrance 
examinations for some subjects (among them architecture, biology, computer science, pharmacy 
and business studies) for the first time in the winter semester 2013/2014.  

Figure  1.1  shows  total  enrolment  in Austrian  HEIs  from  1995  to  2011.  The  overall  number  of 
enrolments in Austrian HEIs increased from 216,820 in 1995 to  343,166 in 2011. The majority 
of students were enrolled in public universities (272,000), and a smaller number were enrolled in 
Fachhochschulen (39,300) and private universities (7,000) in 2011.  

Since  the  first  private  universities  in  Austria  were  accredited  in  2000,  enrolment  in  private 
universities is only recorded from 2003 onwards. University colleges of teacher education were 
upgraded to become tertiary institutions in 2007. 

Figure 1.1 also shows that overall enrollment in Austrian HEIs increased until 2000 but declined 
to 182,000 in 2001. This was mainly due to a decrease in enrolments in public universities, while 
the number of enrolment at Fachhochschulen and other HEIs remained stable or grew. The drop 
in  enrolment  numbers  in  universities  can  be  linked  to  the  introduction  of  tuition  fees  after  a 
change of government in 2000, but it only partially reflects a real decrease in participation (inter 

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National Report for Austria 

Figure 1.1: Total enrolments in Austrian HEIs (1995-2011) 

Source: Statistik Austria6. 

alia  this  was  a  purging  of  inactive  students  from  the  statistics  –  more  on  this  in  Chapter  4). 
Enrolments increased again in the years after 2001. 

Paralleling the data from Figure 1.1, Figure 1.2 shows a drop in transition rates from secondary 
school to public universities from 2000 to 2001, followed by a swift recovery in the year after. In 
contradistinction  to  this,  Fachhochschulen  have  continuously  increased  their  share  of  new 
entrants, and have accommodated the larger part of the enrolment growth observed in our period 
of investigation. 

Across  the  period  of  investigation,  there  is  an  increase  in  participation  rates  among  secondary 
school  graduates  with  HEI  entrance  qualifications  of  about  8%.  A  discontinuous  pattern  until 
2001 is followed by a constant growth. 

6 Statistical online service, available at http://www.statistik.at/web_en/statistics/index.html. 

12 | P a g e  

050,000100,000150,000200,000250,000300,000350,000400,00019951996199719981999200020012002200320042005200620072008200920102011Universities (public)Fachhochschulen (public)Colleges of Teacher Education (public)Universities (private)All HEIstrendline (all HEIs)                                                 
 
National Report for Austria 

Figure 1.2: Transition rates from secondary school (1995-2010) 

Note:  Represents  the  share  of  persons  of  any  given  cohort  of  secondary  school  leavers  with  the  Matura  who 
entered  higher  education  at  a  later  point  in  their  lives.  Domestic  students  only.  Values  for  2008-2010  are 
predictions. 
Source: Landler (2009, p. 19).  

Figure 1.3 investigates participation against the background of demographic changes by relating 
it to the total population in the age group of best-four-years, i.e. all students in the four age-years 
with the highest participation rates in higher education. 

We  see  that  participation  increased  throughout  the  years  2003-2010,  with  a  marked  increase 
between  2008  and  2010.  While  the  increase  in  participation  up  to  2006  is  an  actual  effect  of 
increased  overall  participation, the  additional  increase  in  the  years  after  2006  coincides  with  a 
decrease in the best-four-years population: Fewer people in Austria could have been studying. 

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0%10%20%30%40%50%60%70%80%90%100%1995199619971998199920002001200220032004200520062007200820092010UniversitiesNon-universitiesTotaltrendline (all HEIs) 
National Report for Austria 

Figure 1.3: Participation in best four years (2003-2010) 

Note: Best four years are ages 20-23 in 2003-2004 and 21-24 in 2005-2010. 
Source: Statistik Austria / own calculations. 

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0%5%10%15%20%25%30%050,000100,000150,000200,000250,000300,000350,000400,000450,00020032004200520062007200820092010studentspopulationparticipation (right axis)  
National Report for Austria 

2.  HYPOTHESIS A: AS PRIVATE FUNDING INCREASES, 

INSTITUTIONAL REVENUE INCREASES 

This  chapter  looks  at  data  relevant  to  Hypothesis  A,  which  states  that  as  private  funding 
increases,  institutional  revenue  increases,  but  only  if  public  funding  remains  constant.  That 
means that it will examine whether: 
 
 
 

there has been an increase in private funding 
there has been a concurrent change to public funding 
there has been a total increase in funding and how this is related to changes in private and 
public revenues. 

Changes  in institutional  funding  will  be  considered  both  in  terms  of  total  institutional  revenue 
and relative to the number of students. 

2.1  Changes in Institutional Revenues over Time 

Figure 2.1 shows that the government  was the main source of funding for HEIs between 1995 
and 2009, constantly providing more than 80% of financial support. Nevertheless the portion of 
public funding decreased from 96.1% in 1995 to 87.7% in 2009. A significant drop in relative 
funding by the Federal State is visible in 2002 and again in 2006. 

15 | P a g e  

 
National Report for Austria 

Figure 2.1: Share of HEI revenue from three main sources of funding (1995-2009) 

Note:  ”Other  private”  includes  funds  from  private  businesses  and  non-profit  organisations,  e.g.  religious 
organisations, charitable organisations and business and labour associations. 
Source: OECD Education at a Glance (2005 - 2012). 

The following more detailed account will focus on public HEIs, and will  differentiate between 
public universities and Fachhochschulen, the financing structure of the two types of institutions 
being quite different (see Section 1.2). 

Figure  2.2  shows  funding  for  public  universities  from  six  different  sources  between  2004  and 
2012. Global budgets were introduced when the new Universities Act came into effect in 2004. 
Global  budgets are  provided  to public universities  in  three-year  cycles.  The  smaller  amount  of 
formula  based  funding  (see  Section  1.4)  is  included  in  the  global  budget  in  Figure  2.2.  Since 
2004,  global  budgets  for  public  universities  increased  from  1.9  billion  euros  in  2004  to  3.1 
billion euros in 2012. 

The  graph  also  reflects  the  abolition of  general  tuition  fees  in 2009  which  were  substituted by 
federal funding from 2010 onwards. However, it should be noted that this compensation is set at 
a  fixed  level  and  is  not  expected  to  vary  according  to  student  numbers.  If  this  arrangement 
remains  in  place  the  source  will  decline  in  relative  value  over  time,  especially  in  the  event  of 
growing student numbers. 

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0%10%20%30%40%50%60%70%80%90%100%1995200120022003200420052006200720082009GovernmentStudentsOther Private 
National Report for Austria 

Figure 2.2: Amounts of funding from different sources for public universities 
(2004-2012) 

Note: Constant prices (2011). 
Source: Accounts of the universities (2004-2012).  

The  amount  of  funding  through  fees  for  continuing  education  remained  stable  from  2004  to 
2012. It is the smallest funding source with less than 1% of the overall amount of funding. Figure 
2.3 below represents the data from Figure 2.2 in relative amounts. 

The figure shows a decline of the share of fees after the abolition of general fees in 2009. The 
loss of fees appears to have been fully compensated for by the state after 2010. Figure 2.3 also 
shows that although the debate about tuition fees was very prominent in Austria in the 2000s, the 
actual contribution of tuition fees to university funding was fairly limited. 

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05001,0001,5002,0002,5003,0003,500200420052006200720082009201020112012million eurosGlobal budgetTuition feesFees for continuing educationResearch incomeOther incomeSubstitute for lost fees 
National Report for Austria 

Figure 2.3: Relative amounts of funding of public universities by source (2004-
2012) 

Source: Accounts of the universities (2004-2012). 

Figure  2.4  presents  funding  to  public  universities  from  different  sources  as  a  percentage  of 
Austria’s GDP. It shows an overall growth in spending per GDP over time, with a peak in 2009, 
mainly due to a drop in GDP performance in that year, and an increase after 2010 due to growing 
shares of research income and global budgets. 

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0%10%20%30%40%50%60%70%80%90%100%200420052006200720082009201020112012Global budgetTuition feesResearch incomeOther incomeFees for continuing educationSubstitute for lost fees 
National Report for Austria 

Figure 2.4: Funding of public universities by source as a percentage of GDP 
(2004-2012)  

Source: Accounts of the universities (2004-2012) / OECD (for GDP).  

Fachhochschulen 

The  financial  evolution  of  the  Fachhochschul-sector  as  a  whole  between  2000  and  2011  is 
represented  in  Figure  2.5  below.  The  figure  shows  increasing  federal  expenditures  and  fairly 
constant contributions by the regions. 

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0.0%0.2%0.4%0.6%0.8%1.0%1.2%1.4%1.6%1.8%200420052006200720082009201020112012Global budgetStudent feesResearch incomeOther incomeFees for continuing educationSubstitute for lost fees 
National Report for Austria 

Figure 2.5: Public funding to Fachhochschulen (2000-2011) 

Note: Constant prices (2011). 
Source: Statistik Austria (Bildungsausgabenstatistik 2009-2011).  

Private  contributions  to  Fachhochschulen  differ  greatly  between  institutions  depending  on 
whether tuition fees are charged and how business and industry are involved. Table 2.1 gives an 
overview  of  the  shares  of  private  funding  to  seven  Fachhochschulen  in  the  academic  year 
2006/07  (Fachhochschule  Salzburg:  2005/06).  The  share  of  private  funding  to  public 
Fachhochschulen  varies  between  2% 
and  20% 
(Fachhochschule Wien of the Economic Chamber of Vienna).  

(Fachhochschule  Oberösterreich) 

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 - 50 100 150 200 250 300 350200020012002200320042005200620072008200920102011million eurostotalFederal StateLänder 
National Report for Austria 

Table 2.1: Private funding to Fachhochschulen as shares of total funding 
(academic year 2006/07) 

Tuition fees 

Other private 

Institution 

Oberösterreich 

Salzburg 

Kärnten 

Krems 

Wiener Neustadt 

MCI Innsbruck 

0% 

6% 

4% 

7% 

7% 

9% 

2% 

   13% 

2% 

9% 

7%7 

8% 

9% 

Wien 
Note: Data for Fachhochschule Salzburg refer to academic year 2005/06. 
Source: Österreichischer Rechnungshof (2010, pp. 154-156) / own calculations.  

11% 

2.2  Institutional Expenditures 

Figure 2.6 shows institutions’ average income per student from government appropriations and 
from tuition fees (only universities) over time. 

Public per-student funding in universities decreased by about 13% between 2004 and 2010. This 
downward trend was only stopped in 2009, when special government compensations for lost fees 
were allocated to universities. It can also be seen that income from tuition fees was minor when 
compared to income from public sources (about 3%-4% of the total amount). Public per-student 
income  in  Fachhochschulen  is more  wavering,  with a high  in 2005 and a  subsequent decrease 
until 2008 (data on tuition fee income in Fachhochschulen was not available). 

7 The Fachhochschule Wiener Neustadt has outsourced its applied research into a subsidiary – the data for other 
private income are therefore likely to be underestimated. 

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National Report for Austria 

Figure 2.6: Income per student from public funding and fees at public HEIs 
(2004-2010)  

Note: Fee data only available for universities, and only 2004-2010. Constant prices (2011). 
Source: Statistik Austria (Hochschulstatistik 1995-2003) / Ministry of Education, Science and Culture (2004-2010) / 
own calculations.  

Figure 2.7 shows the student-staff ratio at public and private universities and Fachhochschulen 
between 2004 and 2010. Public universities show the highest ratio of these three HEI types with 
a relatively constant number of 10 to 11 students per  staff (only the rates in colleges of teacher 
education are higher, reaching up to 17 students per teacher in 2010). 

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02,0004,0006,0008,00010,00012,00014,0002004200520062007200820092010euros per studentpublic funding universitiespublic funding Fachhochschulentuition fees universities 
National Report for Austria 

Figure 2.7: Students per academic staff (2004-2010) 

Source: Statistik Austria / own calculations. 

Implemented in 2004, the Universities Act of 2002 awarded universities with more autonomy not 
just  in  financial  matters  but  also  concerning  internal  affairs  and  personnel  policies.  As  the 
Austrian Court of Audit reports, this did not lead to changes in the student-teacher-ratio at two of 
the country’s biggest universities, Vienna University (Universität Wien) and Vienna University 
of  Economics  and  Business  (Wirtschaftsuniversität  Wien)  (Österreichischer  Rechnungshof, 
2010a). 

2.3  Evaluation 

In the period of investigation, private funding for Austrian universities was mainly discussed in 
the context of tuition fees, which were introduced in 2001 and abolished and replaced by state 
compensations in 2009. In the first two  years after their introduction, revenues from fees  were 
transferred  from  the  universities  to  the  federal  budget,  so  that  there  was  no  direct  connection 
between  the  amount  of  fees  an  HEI  secured  and  its  (additional)  budget,  and  not  even  clarity 
about whether the fee income was fully reinvested in the higher education sector. Later fees were 
kept  by  the  universities,  and  private  income  of  institutions  did  increase.  Several  interviewed 

23 | P a g e  

0246810121416182004200520062007200820092010Public universitiesFachhochschulenPrivate universitiesColleges of Teacher Education 
National Report for Austria 

experts noted that this change in regulation had been preceded by public budget cuts or freezes. 
Such  behaviour  contradicts  Hypothesis  A,  and  also  provides  an  interesting  contrast  with 
Germany, Austria’s neighbouring country, where the introduction of fees did not result in budget 
cuts. Unfortunately, the available statistical data on HEI funding do not reach back far enough to 
be able to test the experts’ statements to this effect. Data on universities from the years 2004 to 
2009  do  show  that  there  was  a  continuing  decrease  in  public  funding  during  the  time  when 
tuition fees were being charged. This decrease outsized the additional income through fees on a 
per-student basis. All in all, the history of tuition fees in Austria does not support Hypothesis A. 

A  contextual  phenomenon  with  a  potential  to  influence  the  cost-sharing  balance  was  the 
development of university autonomy, heralded by the Universities Act 2002. As one interviewed 
expert commented, this  change did result in universities seeking more third-party funds, public 
as well as private, but these funds are tied to specific research-related purposes and thus do not 
benefit the institution as a whole. In fact, the expert noted that the increasing focus on third-party 
funds for research even had negative effects on the area of teaching and learning as the increased 
concentration on research resulted in teaching becoming less of a priority. 

Most Fachhochschulen charge fees in the same range as universities did. Few detailed financial 
data from Fachhochschulen are available, making it difficult to test Hypothesis A with respect to 
this type of HEI. With regard to cost-sharing, it is interesting to note that a mixed public-private 
financing model was envisaged for Fachhochschulen but never came into effect: In most cases, it 
was  local  public  authorities  (municipalities  and  regions)  that assumed  financial  responsibilities 
instead  of  private  business.  According  to  one  interviewed  expert,  this  was  not  only  due  to  the 
reluctance on the part of the business sector, but also to the political will of the regions to ensure 
their influence on higher education through engagements in the financing of Fachhochschulen. 

Another  expert  pointed  out  that  a  similar  process  can  be  observed  with  regard  to  private 
universities: Private universities were envisaged to be self-sustaining institutions, but now many 
of  them  are  financially  supported  by  regional  bodies  to  maintain  their  financial  sustainability. 
The same expert stated that attempts by the Austrian federal state to shift costs towards private 
contributors  had  repeatedly  led  to  financial  interventions  by  other  (sub-federal)  public  entities 
instead of private bodies. 

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3.  HYPOTHESIS B: AS THE INCENTIVES TO EARN 

PRIVATE FUNDING INCREASE, INSTITUTIONS BECOME 
MORE RESPONSIVE TO USER DEMAND 

This  chapter  looks  at  data  relevant  to  Hypothesis  B,  which  states  that  as  incentives  to  earn 
private  funding  increase,  institutions  become  more  responsive  to  user  demand.  However,  this 
expected  effect  is  conditional  on  the  attractiveness  of  these  private  revenues  and  whether 
increasing these revenues has trade-off effects for the overall behaviour or prestige of HEIs.  

Various aspects of responsiveness will be examined, including changes to provision, enrolment 
and the connection between HEIS and users. If no changes to responsiveness are visible, this is 
likely  related  to  the  incentive  structure  present  in  the  higher  education  system,  which  might 
favour other behaviours such as the maximisation of public over private funding. 

3.1  Enrolment by Discipline  

Figure 3.1 below shows relatively stable enrolment patterns at universities, with a slight decrease 
in health and welfare subjects after 2005 and an increase in educational sciences. The decrease in 
health and welfare is not due to changes in demand, but to access restrictions in these subjects 
newly introduced in 2005. The hike in health and welfare in Fachhochschulen after 2005 visible 
in  Figure  3.2  is  due  to  the  establishment  of  a  number  of  new  programmes  for  midwifery  and 
medical-technical assistance in the higher education sector. 

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Figure 3.1: Relative distribution of enrolment by field of study in public 
universities (2001-2010) 

Source: uni:data8  

While Fachhochschulen and universities are similar with respect to enrolment in social science, 
business  and  law,  other  subjects  differ  more  depending  the  type  of  HEI:  Whereas 
Fachhochschulen  feature  a  high  level  of  enrolment  in  engineering,  manufacturing  and 
construction, universities show higher enrolment rates in humanities, arts and STEM-subjects. 

8 Higher education data warehouse of the Federal Ministry of Science and Research, available at 
http://www.bmwfw.gv.at/unidata. 

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0%10%20%30%40%50%60%70%80%90%100%2001200220032004200520062007200820092010EducationHumanities and ArtsSocial Sciences, business and lawScience, Physical Science, Math, ComputingEngineering, Manufacturing and ConstructionAgricultureHealth and WelfareServicesOther 
                                                 
 
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Figure 3.2: Distribution of enrolment by field of study in Fachhochschulen (2002-
2010) 

Source: uni:data.  

3.2  Enrolment Patterns by Mode 

Part-time study programmes 

No information was available on the distribution and evolution of the number of full- and part-
time students in the period of investigation. Austria does not have an official part-time student 
status.  At  the  same  time,  a  large  share  of  Fachhochschul-students  study  alongside  working, 
meaning  that  a  rise  in  the  number  of  students  in  this  sector  equates  to  a  rise  in the  number  of 
‘part-time’ students. 

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3.3  Enrolment Composition 

Since public universities account for the majority of enrolments in absolute terms, the number of 
international  students  at  universities  is  naturally  higher  than  at  Fachhochschulen.  In  relative 
terms, 24% of all students enrolled at public universities were not born in Austria in 2011, while 
Fachhochschulen had a share of 9% international students in the same year. Private universities 
seem to be particularly attractive to international students: This group makes up 30% and more 
of total enrolments at private universities. 

Figure 3.3 shows a more or less linear increase in the enrolment of international students by 10 
percentage  points  between  1995  and  2011  at  public  universities.  This  suggests  that  the 
introduction of general tuition fees in 2001 did not deter international students from coming to 
Austria.  On  the  contrary,  the  years  2001-2003  were  the  ones  with  the  strongest  growth  in  the 
shares of international students (note that the number of domestic university students was also on 
the rise in the same period). 

The share of international students at Fachhochschulen was 3% in 1995, remaining constant until 
the  early  2000s,  when  a  steady  increase  began.  In  2010,  the  share  of  international  students  at 
Fachhochschulen was 13%. The influence of tuition fees on the inflow of international students 
cannot  be  evaluated  on the  system  level,  given  that  some  Fachhochschulen charge  tuition  fees 
while others don’t. Overall, though, the trend visible for Fachhochschulen in the 2000s does not 
suggest a major deterrent effect from tuition fees. 

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Figure 3.3: International student enrolment as a percentage of total headcount 
per sector (1995-2010) 

Source: Statistik Austria. 

In the academic year 2010/2011, the largest group of international students were German (38%), 
followed  by  students  from  eastern  European  countries  (17%),  former  Yugoslavia  (11%)  and 
from outside the EU (11%) (see Zaussinger, Grabher, Dünser, Laimer, & Unger, 2011, p. 11). 

3.4  Diversity of Provision 

Changes in the number of HEIs 

The expansion of Austrian HEIs between 1995 and 2011 is visible in Figure 3.4. There were 31 
public HEIs and no private HEIs in 1995 and 56 public and 12 private HEIs in 2010. The first 
private  HEI,  the  Catholic-Theological  Private  University  in  Linz  (Katholisch-Theologische 
Privatuniversität Linz) was accredited in 2000. 

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0%5%10%15%20%25%30%35%40%1995199619971998199920002001200220032004200520062007200820092010Public universitiesFachhochschulenColleges of teacher educationPrivate universities 
 
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Figure 3.4: Number of HEIs by sector (1995-2010) 

Source:EUMIDA9. 

Although  the  private  university  sector  in  Austria  has  grown  consistently  since  the  first  private 
HEI was founded, it must be noted that in terms of student numbers it is still small, serving less 
than 2% of all students. 

Figure 3.4 also shows a disproportional increase of public HEIs between 2006 and 2007, when 
the number of institutions grew from 41 to 56. This can be linked to the establishment of colleges 
of  teacher  education  as  a  new  branch  of  the  higher  education  system  in  2007  and  a  further 
expansion of the Fachhochschul-sector. 

Figure 3.5 shows the size of HEIs  based on  the number of enrolled students.  It shows a rather 
linear  pattern  for  the  size  of  Fachhochschulen,  as  one  would  expect  in  a  newly  established 
sector.  On  average,  they  enrol  2,000  students.  The  private  HEIs  are  very  much  smaller.  The 
pattern in universities is rather discontinuous, with a stepwise decrease in size in the early 2000s. 
The drop in 2001/2002 is due to a decrease in total student numbers, and likewise the increase 
since 2004 is due to increasing numbers of students in the system. The decrease in 2004 is due to 
the outsourcing of medical faculties into medical universities. 

The  dip  in  the  number  of  students  at  public  universities  at  the  introduction  of  tuition  fees  in 
2001– which was exclusively a result of purging non-active students from the records according 

9 European university data collection, available at http://datahub.io/dataset/eumida. 

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3133363636363737384141415656565613557991111121201020304050601995199619971998199920002001200220032004200520062007200820092010Public InstitutionsPrivate Institutions                                                 
 
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to estimations made by Pechar &  Wroblewski (2002, p.19) – resulted in a decrease in average 
size  of  public  universities  and  not  to  the  closure  of  institutions.  However,  this  dip  was 
compensated and the average public university size returned to around 12,000 students.10 

Figure 3.5: Average size of HEIs (number of enrolled students) by type of HEI 
(1995-2011) 

Source: EUMIDA/ own calculations. 

3.5  Outreach Practices 

Marketing budgets 

Concrete  figures  on  the  amounts  of  and  changes  in  HEIs’  marketing  budgets  could  not  be 
obtained.  According  to  the  experts  interviewed,  questions  of  university  marketing  came  to  the 
forefront  in  the  wake  of  the  Universities  Act  of  2002  with  its  emphasis  on  institutional 
autonomy. Since then universities have made efforts to reach out to potential users more actively 
than before. As in Germany, which has a system similar to the Austrian one in many respects, it 
appears that increased marketing efforts are not only an effect of attempts to maximise private 
income,  but  also  of  a  changing  self-image  of  HEIs  and,  in  the  case  of  Austria,  of  a  shift  in 
responsibilities:  Whereas  before  2002  it  was  mainly  the  Ministry  that  was  responsible  for 
assuring HEIs’ public visibility, this task was transferred to the institutions themselves when they 
were made autonomous. One interviewed expert observed that marketing in Austrian HEIs plays 
an  important  role  particularly  where  fee-based  further  education  study  programmes  are 

10 The variation in size is considerable, ranging from 1,100 students (University of Arts and Industrial Design Linz) 
to 88,000 (University of Vienna). 10 of the 21 public universities enrol fewer than 5,000 students. 

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02,0004,0006,0008,00010,00012,00014,00019951996199719981999200020012002200320042005200620072008200920102011Public universitiesFachhochschulenColleges of teacher educationPrivate universities                                                 
 
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concerned,  which  shows  that  opportunities  to  generate  private  revenue  can  give  a  boost  to 
marketing activities. 

Composition of governance and advisory boards 

Since  the  enactment  of  the  Universities  Act  2002,  Austrian  universities  have  had  university 
councils consisting exclusively of external stakeholders from science, culture and business. Half 
of  the  council  members  are  nominated  by  the  university,  the  other  half  by  the  ministry.  The 
councils  have  far-reaching  competencies  in  terms  of  governance  according  to  the  law.  One 
expert commented that although each university council is different, the councils usually do not 
influence  a  university’s  funding  structure,  but  rather  see  themselves  as  lobbyists  for  the 
university. 

Relationship with employers 

Concerning the relationship between HEIs and employers, one interviewed expert observed that 
a process of mutual learning has taken place  during the period of investigation: While business 
and  industry  have  come  to  endorse  a  new  concept  of  employability  based  on  universal,  ‘soft’ 
skills typically acquired in higher education, HEIs have become more attentive to the demands of 
business and industry. This process has affected universities and  Fachhochschulen alike. As an 
example of an organisation mediating the demands of HEIs and business and industry, the expert 
named the chambers of commerce. 

Another expert with insights into the Fachhochschul-sector described awareness of user demand 
as a central element of the mission of Fachhochschulen specified by the law, stating that private 
income  was  not  necessary  for  Fachhochschulen  to  strive  for  responsiveness  towards  user 
demand. In support of this statement, the expert referred to obligatory needs analyses carried out 
in  the  preparation  of  new  study  programmes  as  well  as  to  permanent  contacts  with  employers 
from  the  business  sector, particularly  small  and  medium-size  enterprises. A  direct  influence  of 
cost-sharing on the described developments was not obvious. 

Entrance policies 

Even though the question of how university entrance should be regulated has been a key issue in 
higher  education  politics  in  Austria,  the  topic  has  not  been  discussed  in  the  context  of  cost-
sharing. The rather modest fee levels at public HEIs would appear too insignificant for HEIs to 
compete for students because of expected fee income. Quite the opposite, Austrian universities 
have been seeking ways to limit enrolments to avoid overcrowding - see Section 1.6. In this vein, 
one  national  expert  commented  that  public  HEIs  in  Austria  are  more  focussed  on  establishing 
effective admission restrictions than on the subject of tuition fees, since their ultimate goal is to 
provide adequate teaching and learning conditions for the students they serve, and there is little 
hope  among  university  managers  that  cost-sharing  could  be  developed  in  a  such  a  way  as  to 
balance the enrolment growth seen in recent years.  

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3.6  Quality and Relevance 

The  aim  of  this  section  is  to  investigate  whether  changes  in  cost-sharing  lead  to  changes  in 
student,  graduate  and  employer  satisfaction.  Little  such  information  could  be  obtained  for 
Austria.  One  reason  why  no  such  studies  exist  in  Austria  is  presumably  the  fact  that 
unemployment  rates  among  higher  education  graduates  are  very  low,  indicating  that  there  is  a 
smooth  transition  from  higher  education  into  the  labour  market  and,  therefore,  little  political 
pressure to monitor graduate or employer satisfaction. 

A  one-time  graduate-survey  is  the  ARUFA  study  (Schomburg,  Flöther,  Wolf,  Kolb,  & 
Guggenberger, 2010). Persons who graduated from Austrian HEIs between 2004 and 2010 were 
surveyed  for  various  aspects  of  their  present  employment  and  retrospective  evaluation  of  their 
educational  experience.  There  is  a  general  tendency  of  improvement  in  satisfaction  within this 
seven  year  span.  The  share  of  graduates  being  (very)  satisfied  with  their  studies  increased 
continually from 65% (2004) to 75% (2010) (Schomburg, Flöther, Wolf, Kolb, & Guggenberger, 
2010, p. 141). The share of respondents reporting that they would choose the same subject again 
rose  from  71%  to  77%  in  the  same  period  (ibid.,  p.  141).  A  positive  trend  is  also  visible 
concerning  judgements  on  practical  relevance,  although  from  a  low  base:  33%  of  the  2010 
graduates agree that the employment-related elements of their studies prepared them well for the 
labour market, as opposed to 23% in 2004 (ibid., p. 136).  Different aspects of counselling and 
support  through  teaching  staff  were  also  judged  increasingly  favourable  over  time,  while 
judgements  on  equipment  and  infrastructure  improved  for  all  aspects  except  availability  of 
literature in libraries (ibid., p. 132f.). The possible influence of tuition fees on these judgements 
is acknowledged in the study (ibid., p. 241 fn. 22) but not investigated any further. The studying 
period of almost all of the surveyed graduates fell in the period of time during which general fees 
were  charged  at  Austrian  universities  at  a  constant  level,  making  it  impossible  to  draw 
conclusions regarding the effects of fees on study conditions. The increases we see in different 
aspects of graduate satisfaction merely show that perceived study conditions did not deteriorate 
after general fees were introduced in the Austrian system. 

3.7  Evaluation 

The  hypothesis  tested  in  this  chapter  was  that  institutions  become  more  responsive  to  user 
demand once the incentives to earn  private  funding increase. The central event with respect to 
increases in private funding was the introduction of general tuition fees in 2001. Although this 
was  a  much-debated  decision,  student  contributions to  higher  education through  fees  remained 
rather low in relative terms, as was demonstrated in Chapter 2. This is true from the institutional 
point  of  view  relevant  to  this  chapter  (but  to  some  degree  also  from  the  point  of  view  of 
individual students, as will be elaborated in the next chapter). It is therefore questionable whether 
HEIs  would  have  taken  fees  as  a  reason  to  increase  their  user  responsiveness  in  a  significant 
manner. Accordingly, the available data on provision of programmes and enrolment composition 
do  not  point  in  this  direction.  In  this  context,  one  interviewed  expert  commented  that  the 
introduction of tuition fees in Austria had no other goal than to make up for cuts in government 
funding, i.e. making institutions more responsive was not a political aim at all. Furthermore, the 

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expert stated that the very fact that income from fees had to be used to compensate for budgetary 
cuts  was  damaging  to  the  notion  of  universities  responding  more  directly  to  student  demand, 
because  the  revenues  from  fees  could  not  actually  be  used  to  implement  specific  measures  to 
improve study conditions. According to the expert, this makes the situation in Austria different 
from  that  in  Germany,  where  income  from  fees  was  assigned  to  the  improvement  of  study 
conditions and was not accompanied by budget cuts. 

In a similar vein, one expert noted that he did not perceive any differences in the degree of user 
orientation in Fachhochschulen with and without tuition fees, stating that user orientation is to a 
certain extent part of the mission of all  Fachhochschulen and thus, not tied to the collection of 
tuition  fees.  As  an  illustration  of  user  orientation,  the  expert  explained  that  every  study 
programme  in  Fachhochschulen  is  obligatorily  accompanied  by  an  analysis  of  job  market-
demand for future graduates. 

Another  interviewed  expert  took  a  different  view,  commenting  that  the  introduction  of  tuition 
fees in 2001 did lead to a new perception of students as customers and thus also to a new kind of 
relationship  between  teachers,  students  and  the  HEI  as  an  organisation.  One  expert  called  the 
very idea of HEIs becoming more responsive as a consequence (or precondition) of increasing 
private funds into question. From his point of view, HEIs should strive for external sponsoring of 
activities in which the relation is not that of a direct quid pro quo (contract research for private 
funds,  or  education  for  fees),  but  rather  that  of  philanthropy  or  image  improvements  through 
collaboration. 

Another  expert  addressed  responsiveness  to  user  demand  in  the  context  of  graduate 
employability,  stating  that  employability  of  graduates  could  be  ascertained  if  HEIs  developed 
clear employment profiles for each of their study programmes. Such measures would not depend 
on  cost-sharing  for  their  realisation,  but  rather  on  the  motivation  of  the  academics  concerned 
with study programme planning and implementation. 

A policy change that was not directly cost-sharing related but nevertheless played a role for the 
topic  of  this  study  was  the  strengthening  of  university  autonomy  through  the  Universities  Act 
2002. The removal of direct governmental steering and the establishment of autonomy are what 
gives  institutions  the  freedom  to  become  responsive  in  the  first  place.  The  investigation  of 
changes  in  outreach  practices  suggests  that  as  Austrian  HEIs  received  more  autonomy,  they 
became more sensitive to user demands, but not as a result of changing financing structures. 

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4.  HYPOTHESIS C: INCREASING PRIVATE FUNDING HAS 

A NEGATIVE EFFECT ON PARTICIPATION 

This  chapter  looks  at  data  relevant  to  Hypothesis  C,  which  states  that  as  private  funding 
increases,  costs  increase  to  students  and  their  families,  which  in  turn  may  have  an  impact  on 
quantitative student demand and on the composition of the student body.  

In order to assess this, it is important to look at:  

 

the real costs to students, including direct and indirect support provided by the state, which 
may discount the gross costs 

  how tuition fees are  organised: Who pays and who does not pay? When do you pay  – as a 

 

student or as a ‘successful’ graduate (with a well-earning job)? 
the  overall  trend  of  participation  rates  in  the  country  in  question,  i.e.  expanding,  stable  or 
contracting? 

In  Section  1.6  it  has  been  shown  that  the  introduction  of  general  tuition  fees  in  2001  had  an 
effect on both enrolment numbers and transition rates: Enrolment numbers dropped by 17% in 
the winter semester of 2001/2002, following (and predating) years of constant enrolment growth 
(see Figure 1.1). Transition rates from secondary school to university dropped by 9% in the same 
year (Figure 1.2). This suggests that the increase in cost-sharing deterred a significant number of 
students  and  university  entrance  qualification  holders  from  studying.  The  observations  below 
investigate  in  more  detail  the  interrelation  between  student  cost,  student  support  and 
participation. 

4.1  Students’ Costs for Higher Education 

Student fees 

This chapter begins with a look at how student fees affect students’ budgets on average. Figure 
4.1 represents the incidence of tuition fees as well as the average annual expenditure on tuition 
fees of fee-paying students. The share of students exempt from paying fees was low during the 
time in which general fees were charged in Austria – 88.4% of all students were reported to be 
fee-paying in Social Survey (2002), and 96.7% in Social Survey (2006).11 After the abolition of 
general  fees  in  2009,  the  share  of  fee-paying  students  dropped  to  22%  (Social  Survey  2009, 
likewise  in  2011)  -  these  were  students  at  fee-charging  Fachhochschulen,  non  EU/EEA 
international students, and students studying beyond the stipulated period of study. 

11 But all students receiving means-tested grants were repaid the fees - see below. 

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The graph shows that between 2002 and 2011, the average fee level decreases from about 870 to 
about 730 constant euros. This is solely an effect of inflation: Fees have been kept constant in 
nominal values since 2001, whereas Figure 4.1 uses constant prices. 

Figure 4.1: Average annual amount of student fees and share of fee-paying 
students at public HEIs (2002-2011)  

Note:  Average  fee  levels  refer  only  to  the  share  of  fee-paying  students.  Data  for  2009  refer  to  the  summer 
semester 2009, when fees for most domestic students had been abolished. Constant consumer prices (2011). 
Source: Social Survey 2002/2006/2009/2011.  

Fees  are  related  to  other  student  costs  in  Table  4.1.  It  shows  that  student  costs  increased 
significantly  between  1998  and 2002  (plus  15%)  and decreased  again  between  2006  and 2009 
(minus  11%).  These  changes  were  clearly  influenced  by  the  introduction  and  subsequent 
abolition  of  fees  (2001/2009).  However,  fees  only  accounted  for  about  two  thirds  of  the  cost 
increase: Costs for housing and travel also increased. Similarly, the cost decrease between 2006 
and 2009 was not only caused by the abolition of general fees at universities (fees for long-term 
students  and  international  students  remained),  but  also  by  all  other  costs  except  housing 
decreasing. 

Overall, fees accounted for around 8% of total student cost during the period of general tuition 
fees. 

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Table 4.1: Annual student costs (1998-2011)  

Learning 
material 

790 

800 

Housing 

Food 

Transport 

Clothing 

Fees 

Total  

1998 

2002 

2006 

2009 

2011 

2,920 

2,580 

1,010 

3,320 

2,400 

1,220 

1,000 

3,440 

2,380 

1,000 

850 

790 

3,540 

2,320 

3,550 

2,310 

900 

950 

790 

800 

720 

640 

620 

- 

780 

790 

160 

160 

8,090 

9,320 

9,340 

8,410 

8,380 

Note: Includes only national students. Constant consumer prices (2011). 
Source: Social Survey 2009/2006/2002 / IHS-project reports / own calculations. 

Student grants 

In  2008/2009,  17.6%  of  all  students  received  public  financial  aid  or  a  scholarship  through  the 
Federal State, the average amount being 4,357 euros (BMWF, 2010, p. 18). In 2009 the BMWF 
spent a total of 190 million euros on public support in form of direct and indirect payments. 2009 
marked  the  first  year  since  2004  in  which  expenditure  on  student  support  did  not  increase  in 
comparison to the year before. This is due to the fact that student support in Austria included the 
refunding of tuition fees (Studienzuschuss), and after the abolition of fees at universities in 2008, 
this type of support was no longer needed for most students. 

Figure 4.2 represents both the  change of public expenditure on student support and numbers of 
public study grants issued over time. An upwards trend in the provision of grants to university 
students  is  visible  starting  in  2002,  a  year  after  general  tuition  fees  were  introduced.  This  is 
partly due to the fact that, as mentioned above, the means-tested grants come with the option of 
having  tuition  fees  refunded  (witness  also  the  drop  after  2008).  At  the  same  time,  the  general 
eligibility criteria for study grants were adapted after the introduction of general fees: Parental 
income thresholds were lowered, resulting in an extended group of grant recipients. According to 
one national expert, this was a way of making tuition fees palatable to middle class families.  

The number of grants provided to students at  Fachhochschulen increased after 2002, in a more 
linear fashion. The value of grants issued is roughly parallel to the number of grants to university 
students (this being by far the largest group of students). It shows that the average value of grants 
issued  to  students  remained  relatively  stable  throughout  the  years,  except  for  a  discrepant 
progression in the mid-2000s, when the number of grants was still rising while their overall value 
went down. The parallel patterns in numbers of grants for university students and value of grants 
is most likely due to the fact that most students in Austria are university students.  

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Figure 4.2: Number of study grants by type of HEI and value of all grants (1999-
2010) 

Note: Constant prices (2011). 
Source: BMWF / IHS (Materialien zur sozialen Lage der Studierenden 2003/2007/2012).  

Indirect assistance 

Figure  4.3  below  charts  student  support  other  than  grants,  such  as  payments  to  parents  which 
come in the form of child benefits for parents of studying children. Since parents are required by 
law to assure the livelihood of their children as long as they are in education, child benefits are 
one  way  of  indirect  support  to  students.  The  graph  shows  that  public  expenditure  on  child 
benefits for parents of students increased between 2003 and 2010, from 229 to 267 million euros, 
due to an increase in student numbers. In comparison, subsidies for room, board and transport are 
less  significant.  Both  declined  over  time,  in  particular  subsidies  for  room  and  board,  which 
dropped significantly between 2001 and 2002.12 

12 An indirect subsidy not shown in Figure 4.3 (because it is not surveyed or provided by statistics) is indirect 
benefits through reductions in health insurance and transport for recipients of child benefits. 

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05010015020025005,00010,00015,00020,00025,00030,00035,00040,000199920002001200220032004200520062007200820092010million  eurosNumber of grants universityNumber of grants University of ArtsNumber of grants non-universityValue of all grants (right axis)                                                 
 
National Report for Austria 

Figure 4.3: Indirect student support (1999-2010) 

Note: Constant prices (2011). 
Source: BMWF / IHS (Materialien zur sozialen Lage der Studierenden 2003/2007/2012). 

Student loans 

Except for a small number of bank loans offered to students under special conditions, there is no 
student loan system in Austria comparable to what one finds in e.g. England or Canada, neither 
for living expenses nor for tuition fees. 

Total student cost 

Figure 4.4 graphs average annual costs for Austrian students between 2002 and 2011. Looking at 
the  average  student,  we  see  that payments  to parents  of  studying  children  in  the  form  of  child 
benefits  are  more  important  than  grants.  The  former  amount  to  between  7%  and  8%  of  total 
student costs of living, whereas the latter amount to between 12% and 13%. Considering student 
costs minus state grants, it becomes apparent that the change in student grants (average paid per 
student) parallels that of student cost). Figure 4.4 also shows that on the aggregate level, public 
support to students is more comprehensive in monetary terms than tuition fees. Overall, though, 
the student cost of living is predominantly borne by students themselves: Taken together, the two 
most  important  sources  of  state  support,  grants and child  benefit, amount  to between  16%  and 
21% of total student costs in 2006/2009. 

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050100150200250300350199920002001200220032004200520062007200820092010million eurosPayments to parentsSubsidised room & boardSubsidised transportation 
National Report for Austria 

Figure 4.4: Annual student costs per average student (2002-2009) 

Notes: Student costs include the categories listed in Table 4.1. Data on costs and student support refer to national 
students only. Constant prices (2011). 
Source: Social Survey 2002/2006/2009 / own calculations. 

Relative earnings 

To  assess  whether  higher  education is  a  favourable  investment  in  the  face  of  changing  private 
costs, this study uses UOE data to represent relative earnings of persons with a tertiary degree as 
opposed to the average relative earnings of persons with an upper secondary or post-secondary 
non-tertiary education, see Figure 4.5.  

We see a relatively constant curve with only few oscillations between an indexed 149 (2005) and 
159  (2008).  Overall,  the  relative  earnings  of  Austrian  graduates  are  fairly  close  to  the  average 
levels of the EU21 area. 

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01,0002,0003,0004,0005,0006,0007,0008,0009,00010,000200220062009eurosstudent coststudent cost minus grantsstudent cost minus grants and child benefit 
National Report for Austria 

Figure 4.5: Relative earnings of persons with a higher education degree (2005-
2011) 

Note:  Data  indexed  to  earnings  of  a  person  with  upper  secondary  and  post-secondary,  non-tertiary  education 
(=100). 
Source: OECD Education at a Glance 2013. 

Debt levels  

No  data  on  debt  levels  of  Austrian  students  /  graduates  were  available  across  the  period  of 
investigation.  According  to  a  recent  survey  commissioned  by  the  Austrian  Union  of  Students 
(Thaler & Unger, 2013, p.7), 16% of Austrian university students are in debt, of which more than 
half  attribute  their  debts  to  study-related  expenditures.13  A  common  cause  of  debt  are  study-
related stays abroad. 36.7% of students report to be in financial difficulty (Thaler & Unger, 2013, 
p. 7). 

13 This includes international students with loan debts, e.g. German students taking out loans from the public 
German loan system BAföG. Among national students, the share of students with debt is 14%, 46% of whom 
attribute their debt to study-related causes. 

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0204060801001201401601802005200620072008200920102011                                                 
 
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4.2  Participation Rates 

Figure 4.6 shows student costs of living as represented in Figure 4.4 in comparison with entry 
and  transition  rates.  Tuition  fees  (as  the  average  across  the  entire  student  population)  are  also 
included. 

We see that entry rates increased from 29% to 43% between 2002 and 2009. In the same period, 
transition rates from secondary school increased by about 8%. Most of this increase took place 
between 2002 and 2006. Student costs remained rather constant in that period. In the time during 
which student costs decreased, partly as a result of the abolition of fees, entry rates continued to 
grow rapidly, from 32% in 2006 to 43% in 2009. In summary, a correlation between student cost 
and participation is not observable across the years investigated here. 

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Figure 4.6: Student costs and participation (2002-2009) 

Notes:  Student  costs  as  defined  in  Table  4.1.  Fees  calculated  as  the  average  amount  per  student  across  entire 
student  population.  Value  for  2009  predicted.  Entry  rate:  share  of  first-year  national  students  to  total  national 
population in age group 18-21. Transition rate: share of university entrance qualification holders that enter higher 
education. Constant prices (2011). 
Source: Social Survey 2009/2006/2002 / Statistik Austria / own calculations.  

The introduction of general tuition fees in 2001, arguably the central event with respect to cost-
sharing in the period considered here, lies before the time when the various data on student costs 
displayed in Figure 4.6 were available. A study that sheds  some light on this episode is Pechar 
and Wroblewski (2002). The authors compare national enrolment data before and after the winter 
semester 2001/2002, when general tuition fees were introduced, presuming that any changes can 
primarily be attributed to the increase in student costs via fees. What complicates matters in the 
case of Austria is that before the introduction of fees there was  an exceedingly high number of 
enrolled students in the records that were inactive, i.e. they  were counted as students but were 
not actively working towards their final exams. To fix this, Pechar and Wrobleswki (2002) relate 
data on exams gathered from the universities to the decrease in enrolments after the introduction 

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0%10%20%30%40%50%60%70%80%90%01,0002,0003,0004,0005,0006,0007,0008,0009,00010,000200220062009eurosstudent coststudent cost minus grantsstudent cost minus grants and child benefitfeestransition rate (right axis)entry rate (right axis) 
National Report for Austria 

of  fees  and  conclude  that  the  decrease  in  enrolments  (-21%  between  the  winter  semester 
2000/2001  and  2001/2002)  can  be  entirely  explained  by  the  elimination  of  inactive  students, 
which they  estimate  at 25%  of  total  enrolment.  If  this  is  correct,  then  active  Austrian  students 
were rather not deterred by tuition fees. 

4.3  Composition of the Student Body 

Figure 4.7 shows the social background of the Austrian student body as specified in the national 
student survey. The graph shows a constant increase for the group of students from medium-to-
high  backgrounds  (from  28%  to  33%),  whereas  the  group  of  students  from  high  backgrounds 
remains  fairly  constant  in  relative  size  (around  18%)  except  for  a  peak  in  2006.  The  group  of 
students from medium backgrounds is more volatile in size, with a growing trend (26% to 30%) 
from  2006  to  2011.  The  clearest  trend  in  Figure  4.6  is  the  constant  decrease  in  enrolments  of 
students  from  lower  social  backgrounds,  from  26%  in  1998  to  below  18%  in  2011.  Although 
various  sources  point  out  that  the  introduction  of  tuition  fees  might  have  deterrent  effects 
particularly on students from lower social backgrounds (see literature review of the main report), 
the  constancy  with  which  the  proportion  of  students  from  lower  social  backgrounds  decreases 
shown in Figure 4.7 makes it seem unlikely that the introduction of tuition fees in 2001 was a 
major driver of this trend. Two other possible explanations for the trend the figure shows would 
be  a  general  bias  with  respect  to  access  to  higher  education  (not  necessarily  related  to  fees  or 
cost-sharing), or the educational / professional upgrading of the parent generation. That the latter 
had  an  effect  is  suggested  by  Figure  4.8,  which  shows  highest  educational  attainments  of  the 
total population over time. Although the indexes used in Figures 4.7 and 4.8 are not identical (the 
Social Survey takes into account the occupation of the parents in defining social backgrounds), a 
shift towards higher educational degrees across the population is evident. 

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Figure 4.7: Social background of student body (1998-2011) 

Note:  Social  background  is  defined  as  a  combination  of  parents’  highest  educational  attainment  and  current  or 
former profession. Only students whose parents were born in Austria. 
Source: Social Survey 2011.  

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26.20%22.50%20.30%18.60%17.70%27.60%28.70%25.80%30.80%30.30%28.10%30.40%32.70%33.20%33.90%18.10%18.30%21.20%17.40%18.10%0%10%20%30%40%50%60%70%80%90%100%19982002200620092011lowmediummedium-highhigh 
 
National Report for Austria 

Figure 4.8: Highest educational attainment in total population (1991-2011) 

Source: Statistik Austria, population census data. 

4.4  Completion Rates 

There are no national studies on completion and retention in Austria. The OECD’s ‘Education at 
a  Glance’  includes  data  on  completion  /  ‘survival’  rates  in  tertiary  education  at  irregular 
intervals. The rates are calculated by dividing the number of graduates by the number of entrants 
in the typical year of entry. The results are summarised below: 

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5%7%15%10%11%14%11%12%14%32%34%31%42%36%27%0%10%20%30%40%50%60%70%80%90%100%199120012011tertiary degreehigher secondarylower secondaryapprenticeshipno secondary 
 
 
National Report for Austria 

Table 4.2: Completion rates in tertiary education (2000-2008)  

‘Education at a Glance’ 
issue 

year(s) of reference for 
university entrants 

completion rate 

2007 

2009 

2010 

2013 

not specified 

2000-2003 

2002-2005 

2006-2008 

Note: Calculation methods may differ between years. 
Source: OECD Education at a Glance. 

65% 

71% 

64% 

65% 

The informative value of these data was called into question by national Austrian experts on the 
grounds that the time after entry at which completion is surveyed is inadequately short for the 
Austrian  system:  Since  many  Austrian  students  study  longer  than  the  predetermined  period 
(usually three  years), the share of dropouts, defined as the percentage of  the cohort not having 
obtained  a  degree,  is  overestimated.  Due  to  these  reservations,  the  above  data  will  not  be 
correlated to financing issues here.  

4.5  Evaluation 

This chapter investigated whether and how changes in cost-sharing impact participation in higher 
education.  The  two  key  events,  the  introduction  (2001)  and  abolition  (2009)  of  general  tuition 
fees, were found to have affected participation, showing that changing levels of cost-sharing may 
influence demand for higher education, even though the effects were only temporary in this case. 

Data  on  both  enrolment  numbers  and  transition  rates  from  secondary  school  show  that  the 
introduction of general tuition fees in 2001 was accompanied by an abrupt drop in participation 
in  universities  (transition  rates:  -9%;  enrolments:  -21%).  The  significance  of  these  data  is 
difficult  to  judge  given  the  problem  of  distinguishing  active  from  non-active  students  in  the 
statistics  (see  Section  4.2).  While  Pechar  and  Wroblewski  (2002)  attribute  the  decrease  in 
participation  entirely  to  the  sub-group  of  inactive  students,  Landler  (2009)  takes  a  slightly 
different  perspective:  He  observes  that  the  decrease  in  transition  rates  to  university  in  2001  is 
similar to an earlier drop, which took place between 1995 and 1997 (also visible in Figure 1.2). 
According  to  Landler  the  two  events  have  a  common  trait  which  is  a  preceding  increase  in 
private costs to students: by way of cuts in public support to students in the earlier case,14 and by 
way of introducing fees in the more recent case. Landler concludes from this that “new entrants 
to  universities  react  relatively  sensitively  to  social  measures”  (by  which  he  means  changes  in 
cost-sharing in the present terminology). Landler’s conclusion points to a more substantial link 

14 Landler (2009, p. 19) names cuts in transportation subsidies and restrictions in the allocation of child benefits. 

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between  participation  and  student  cost,  and  would  tend  to  verify  Hypothesis  C,  with  the 
qualifications made. Unfortunately, the data gathered for the present study does not reach back 
far enough in time to shed more light on this issue. 

What is somewhat unexpected on both Pechar and Wroblewski’s and Landler’s accounts is that 
in  the  years  after  the  introduction  of  tuition  fees,  transition  rates  (as  well  as  total  enrolments) 
recovered in a continual manner, and in 2006 enrolments outstripped the numbers of the years 
before  2001  and  have  continued  to  grow  ever  since.  This  makes  it  appear  like  there  was  an 
initial,  short-term  deterrent  effect  of  tuition  fees  on  secondary  school  graduates,  which  then 
vanished. This pattern might be taken to suggest that the adverse effects on participation could 
have  been  mitigated by  a  smoother  preparation  and  communication  strategy  on  the  side  of  the 
government.  The  above  investigation  of  the  financial  impact  on  the  student  purse  showed  that 
fees amounted to about 8% of the cost of living for the average student, while state support for 
national  students  (direct  and  indirect)  averaged  over  twice  that  amount.  Tuition  fees  were 
reimbursed to students from lower-income backgrounds, and in the wake of the introduction of 
fees, the needs-based grant system was altered so as to include a larger group of students. 

The abolition of general tuition fees in 2009 resulted in an abrupt 14% increase in enrolments. 
Several interviewed  experts reported that numerous students that had dropped out of university 
during the tuition fee period resumed their studies once fees had been abolished, which would go 
some  way  towards  explaining  this  change.  Another  possible  explanation  advanced  by  national 
experts is the global economic crisis of 2007 onwards, which may have motivated many young 
people to enrol in university for lack of an immediate employment perspective, particularly in an 
admission-free and tuition-free system. 

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5.  HYPOTHESIS D: INCREASING PRIVATE FUNDING 
AFFECTS STUDENT CHOICE OF HOW OR WHAT TO 
STUDY 

This  chapter  looks  at  data  relevant  to  Hypothesis  D,  which  states  that  as  private  funding 
increases,  costs  increase  to  students  and  their  families,  which  in  turn  will  have  an  impact  on 
students’ choice of how and what to study. Accordingly, this section looks at these topics: have 
student age, location or field of study and time to completion changed over time in relation to 
cost-sharing? 

5.1  Student Study Patterns 

This section investigates whether and how study patterns change as a result of changes in cost-
sharing.  One  relevant  pattern  might  be  changes  in  student  age.  For  instance,  students  might 
choose to delay higher education to earn savings allowing them to pay for higher costs, or more 
mature  students  might  enrol  due  to  their  more  secure  financial  status.  Figure  5.1  gives  an 
overview of student age in Austria over time, differentiated by type of HEI. 

Figure  5.1  shows  that  students  at  universities  tend  to  be  younger  than  students  at 
Fachhochschulen.  Fachhochschulen  enrol  more  students  with  a  secondary  school  vocational 
certificate  (Berufsreifeprüfung),  an  HEI  entrance  qualification  acquired  while  working.  In 
contrast,  universities  have  higher  shares  of  students  with  the  ‘regular’  maturity  certificate 
(Reifezeugnis/Matura),  hence  the  difference  in  average  age.  On  the  other  hand,  clear  shifts  in 
student age which could be related to changes in cost-sharing, such as the introduction of tuition 
fees in 2001, cannot be deduced from Figure 5.1. After the introduction of fees in 2001, student 
age tended to increase in universities, while it decreased slightly in Fachhochschulen. The latter 
tendency  is  most  probably  due  to  the  fact  that  policymakers  gave  the  provision  of  full-time 
programmes (favoured by younger students) preference over programmes for students who work 
while studying 

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Figure 5.1: Average age of students by type of HEI (1995-2010) 

Source: Austrian Statistical Central Office (1995-2003) / Ministry of Education, Science and Culture (2004-20010) / 
Statistik Austria. 

5.2  Location of Study 

Considering  the  fact  that  all  public  HEIs  had  the  same  fee  levels  (2001-2009),  changes  in  the 
location  of  study  would  not  have  saved  students  money,  at  least  not  as  long  as  they  stayed  in 
Austria  to  study.  In  the  Fachhochschul-sector,  there  is  some  variation  as  certain  institutions 
charge the standard fee of 363 euros per semester while others do not. However, as one expert 
noted, the range of programmes and the admission criteria are rather diverse across regions,  so 
that tuition fees are unlikely to play an important role in location choice. 

5.3  Field of Study 

The  topic  of  this  section  relates  to  that  of  Section  3.1,  where  changes  in  the  provision  of 
programmes  were  discussed.  From  the  student  point  of  view  relevant  to  the  present  chapter, 
changes in field of study or level of education may result from changes in cost-sharing because 
students  are  pursuing  less  expensive  programmes  or  selecting  programmes  with  more  direct 
relevance  to  employment.  Figures  5.2/5.3  give  an  overview  of  enrolment  numbers  in  different 
disciplines. 

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051015202530351995199619971998199920002001200220032004200520062007200820092010Universities (public)Fachhochschulen (public)Colleges of Teacher Education (public)Universities (private) 
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Both  graphs  show  a  strong  increase  in  social  sciences,  business  and  law,  which  turns  into  a 
decrease  only  in  universities  after  2009.  Universities  also  witnessed  a  growing  number  of 
enrolments  in  humanities  and  arts  in  the  first  half  of  the  2000s,  which  turned  into  a  slight 
decrease  in  the  beginning  of  2010.  Moreover,  both  universities  and  Fachhochschulen  saw 
increases  in  enrolments  in  engineering,  manufacturing  and  construction.  Figure  5.3  shows  that 
this  field  has  become  a  clear  focus  of  Fachhochschulen  besides  social  sciences,  business  and 
law. 

Figure 5.2: Number of new entrants in universities by field of study (2001-2010)  

Notes: Students might be enrolled in more than one programme. 
Source: uni:data. 

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05,00010,00015,00020,0002001200220032004200520062007200820092010EducationHumanities and ArtsSocial Sciences, business and lawScience, Physical Science, Math, ComputingEngineering, Manufacturing and ConstructionAgricultureHealth and WelfareServicesOther 
 
 
National Report for Austria 

Figure 5.3: Number of new entrants in Fachhochschulen by field of study 
(2002-2010)  

Source: uni:data. 

Unfortunately, no figures were available for the years before 2001, so that a comparison between 
enrolment behaviour before and after the introduction of tuition fees is impossible. Two experts 
were interviewed on the question of whether changes in choice of study programmes had been 
observable as an effect of the introduction of tuition fees, and reported that they were not aware 
of  any  such  changes,  both  pointing  to  the  relatively  low  level  of  fees  in  Austria.  Pechar  and 
Wroblewski (2002, p. 19f.) investigate enrolment numbers in universities and Fachhochschulen 
and - finding an increase in enrolments in  Fachhochschulen and in fields of study with a  clear 
professional orientation in universities - suggest that this could be an effect of the introduction of 
tuition  fees.  The  trend  towards  increases  in  enrolments  in  Fachhochschulen  is  verified  for  the 
years  after  2002  by  Figure  5.3.  A  trend  towards  more  enrolments  in  subjects  with  a  direct 
relationship to the labour market (Pechar and Wroblewski are not explicit about which subjects 
they have in mind) cannot be verified by Figure 5.2. For instance, both a decrease in engineering, 
manufacturing  and  construction  (which  tends  to  be  more  directly  linked  to  the  labour  market) 
and  an increase  in  arts  and humanities  (often  less  directly  linked  to  the  labour  market)  can  be 
observed.  It is true, however, that Fachhochschulen are unable to satisfy the demand for study 
places  in  this  sector:  Fachhochschulrat  (2011,  Appendix  13)  shows  that  there  are  on  average 
three  applicants  for  every  study  place  at  a  Fachhochschule;  in  health  science,  there  are  7.7 
applicants per place. Consequently, the figures on new entrants in Figure 5.3 reflect supply, not 
demand. The strong demand for study places in Fachhochschulen is not necessarily an effect of 
cost-sharing, since Fachhochschulrat (2011, Appendix 10) also shows that applicant numbers for 
study  places  at  Fachhochschulen  have  greatly  exceeded  supply  since  as  early  as  1998,  before 
tuition fees were even introduced into the Austrian system. According to Social Survey (2002, p. 

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200),  8%  of  first-year  students  report  to  have  chosen  a  study  programme  with  favourable  job 
opportunities because of the existence of tuition fees. 

5.4  Time-to-Completion 

Since no statistical data were available on time-to-completion, this topic was dealt with in expert 
interviews.  Several  experts  agreed  that  the  introduction  of  fees  in  2001  caused  many  students 
who for various reasons had delayed their final exams to sign in for these exams, obviously to 
avoid additional costs. Moreover, a certain number of students who were officially enrolled but 
did not study actively de-registered after fees were introduced. Both of these phenomena led to 
shorter average times-to-completion in the years after the introduction of fees.  A general, long-
term effect in terms of shorter duration of studies incentivised by fees cannot be deduced from 
this. 

One  expert  was  more  positive  that  even  relatively  low  fee  levels  cause  students to  study  more 
efficiently,  benefitting  both  the  individual  student  and  the  institution.  According  to  the  expert, 
such effects could be observed in Austria during the period of general tuition fees (2001-2009). 

Another expert commented that it must be borne in mind that the introduction of tuition fees in 
Austria  coincided  with  study  reforms  aiming  at  shorter  programme  durations.  Any  empirical 
observations about shorter study times could therefore not  simply be interpreted as an outcome 
of the fee regime. 

Social  Survey  (2002)  surveyed  students concerning  their  reaction to  the  introduction  of  tuition 
fees in 2001. 56% reported that they were going to finish their studies as quickly as possible to 
save  costs  as  a  consequence  of  the  obligation  to  pay  fees.  This  was  the  most  frequently  given 
answer  when  asked  about  reactions  to  the  introduction  of  fees.  28%  answered  that  they  were 
going to attend only classes that were directly relevant to achieving their degree to safe time, and 
6%  answered  that  they  were  going  to  invest  less  time  in  paid  work  to  be  able  to  finish  their 
studies  more  quickly.  This  shows  that  a  shorter  time  to  completion  was  a  major  concern  for 
students after the introduction of tuition fees. 

5.5  Evaluation 

The  aim  of  this  chapter  was  to  investigate  whether  increasing  private  funding  changes  student 
choice of what or how to study. In Austria, the most tangible event with respect to changing the 
share  of  private  contributions  was  the  introduction  of  tuition  fees  (amounting  to  around  730 
euros per year) in 2001 and their subsequent abolition in 2009. The available data revealed few 
effects in terms of study behaviour. 

One obvious explanation for this result is that tuition fees were simply not high enough to cause 
students  to  change  their  study  behaviour.  Several  interviewed  experts  took  this  view.  One  of 
them commented that effects of fees on study behaviour as such were conceivable, e.g. in terms 
of students seeking subjects or programmes with favourable  rates of return in professional life, 

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but that in the case of  Austria, fees  were not high enough for most students to engage in such 
considerations.  Another  expert  noted  that  fees  at  the  level  stipulated  in  Austria  may  cause 
students  to  change  the  ‘how’,  i.e.  study  more  quickly  and  efficiently,  but much  less  likely  the 
‘what’ (i.e. choice of programme). This judgement tends to be confirmed by data from the Social 
Survey  (2002)  which  showed  that  students  were  most  concerned  about  shorter  times  to 
completion after the introduction of tuition fees, but less with the choice of programme. 

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6.  CONCLUSION 

The  results  of  this  country  report  are  similar  to  that  of  the  German  report  in  many  ways:  In 
Austria  as  in  Germany,  the  central  event  with  respect  to  cost-sharing  was  the  introduction  of 
tuition fees, whereas other types of private contributions to HEI financing turned out to be more 
difficult to assess. Similar to Germany, tuition fees in Austria were relatively moderate compared 
to the real cost of higher education, but their introduction was nevertheless accompanied by an 
intense  political  debate.  The  champions  and  critics  of  tuition  fees  were  divided  into  two 
comprehensive  political  camps,  with  the  conservatives  more  in  favour  of  fees  and  the  social-
democrats and greens opposing them.  In  both countries the introduction as well as abolition of 
tuition  fees  was  brought  about  by  changes  in  government  –  a  fact  which  caused  several 
interviewed experts from both countries to comment on the evidential versus party-political basis 
of the underlying decisions about the implementation and organisation of tuition fee systems. 

As  was  shown  in  Chapter  2,  higher  education  in  Austria  is  to  a  very  large  degree  publicly 
funded.  There  is  evidence  that  the  introduction  of  fees  resulted  in  a  decline  in  public  funding, 
although this is difficult to show with the available statistical data. Several experts affirmed that 
there  were  political  intentions  to  use  tuition  fees  to  compensate  earlier  cuts  in  public  funding. 
This  refutes  Hypothesis  A:  Overall  institutional  funding  does  not  increase  as  private  funding 
increases.  However,  the  data  also  show  that  although  per-student  funding  from  public  sources 
has  been  waning,  the  quantitative  expansion  of  the  Austrian  higher  education  system  is  still 
primarily financed through public funds. Looking at the facts it is hardly conceivable that the fee 
system in Austria could have developed in such a way as to cover the additional cost caused by 
this expansion. 

Chapter  3  investigated  changes  in  institutional  responsiveness  targeted  by  Hypothesis  B  and 
found  that  -  again  paralleling  findings  from  the  case  study  on  Germany  -  although  changes 
towards more responsiveness can be observed in individual aspects, they do not relate directly to 
changes in cost-sharing. In Austria, too, the topic of responsiveness to user demand seems to be 
embedded  in  the  larger  context  of  institutional  autonomy,  accountability  and  changing  self-
images and public images of HEIs, and less in the cost-sharing debate. 

The  introduction  of  tuition  fees  had  momentary  but  clear  effects  on  participation  patterns 
(Hypothesis C). The exact circumstances of this development could not be clarified here, but the 
Austrian  university  sector  provides  evidence  that  the  introduction  of  tuition  fees  may  have 
negative  effects  on  participation,  and  vice  versa:  participation  spiked  in  2009,  when  fees  were 
scrapped  for  most  students.  What  is  intriguing  about  the  Austrian  case  is  that  the  observed 
negative effects of the introduction of fees  on participation were  neutralised  very quickly after 
the intervention. It is difficult to see what conclusion to draw from this. 

Few  effects  on  study  behaviour  could  be  detected  (Hypothesis  D),  a  result  which  can  most 
plausibly  be  linked  to  the  comparatively  low  fee  level.  It  was  shown  that  tuition  fees  only 
accounted  for  8%  of  students’  total  cost  on  average  and,  furthermore,  that  a  relatively  large 

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number of students was exempted from paying fees not de jure but de facto by being returned the 
fees through the grant system.  

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Bundesministerium für Wissenschaft und Forschung (BMWF). (2010). Bericht - Materialien zur 

sozialen Lage der Studierenden 2010. Vienna: Author. Retrieved from 
http://www.forschungsnetzwerk.at/downloadpub/Materialien_SozialenLage_2010_bmwf_ih
s.pdf 

Bundesministerium für Wissenschaft und Forschung (BMWF). (2011). Universitätsbericht 2011. 

Vienna: Author. Retrieved from 
http://www.bmwf.gv.at/uploads/tx_contentbox/Universitaetsbericht2011.pdf 

Döbert, H., Döbrich, P., von Kopp, B., & Mitter, W. (2001). Aktuelle Bildungsdiskussionen im 
europäischen und außereuropäischen Rahmen. Frankfurt a. M.: Deutsches Institut für 
internationale pädagogische Forschung. Retrieved from http://www.blk-
bonn.de/papers/forum-bildung/band01.pdf 

ERAWATCH. (n.d.). Support-measure: K Plus. Retrieved March 03, 2014, from 

http://erawatch.jrc.ec.europa.eu/erawatch/opencms/information/country_pages/at/supportme
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EUA. (n.d.). University autonomy in Europe: Austria. Retrieved February 14, 2014, from 

http://www.university-autonomy.eu/countries/austria/ 

Eurydice. (2009). Nationale Kurzdarstellungen der Bildungssysteme in Europa und der aktuellen 

Reformen: Österreich. Brussels: Author. Retrieved from 
http://www.pakte.at/attach/047_AT_DE.pdf 

Fachhochschule Salzburg. (n.d.). Daten & Fakten. Retrieved March 20, 2014, from 
http://www.fh-salzburg.ac.at/ueber-uns/daten-fakten/fhs-im-ueberblick/ 

Fachhochschulrat. (2011). Bericht des Fachhochschulrates 2010 (FHR-Jahresbericht 2010). 
Retrieved from https://www.aq.ac.at/de/analysen-berichte/dokumente-jahresberichte/fhr-
jb2010-bericht.pdf 

IST Austria. (n.d.). Donations. Retrieved March 03, 2014, from http://ist.ac.at/de/ueber-ist-

austria/donations/ 

Landler, F. (2009). Hochschulplanungsprognose 2008. Analyse und Computersimulation des 

österreichischen Hochschulsystems. Endbericht. Vienna: Institut für Demographie der 
Österreichischen Akademie der Wissenschaften. 

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Lanzendorf, U. (2006). Austria – From Hesitation to Rapid Breakthrough. In B. M. Kehm & U. 
Lanzendorf (Eds.), Reforming University Governance. Changing Conditions for Research 
in Four European Countries (pp. 99–134). Bonn: Lemmens. 

Österreichische HochschülerInnenschaft. (2012). STEOPWATCH. Evaluationsbericht der ÖH 

Bundesvertretung zur STEOP (Studieneingangs- und Orientierungsphase). Retrieved from 
http://www.oeh.ac.at/fileadmin/user_upload/pdf/Presse/STEOPWATCH_Evaluationsberich
t.pdf  

Österreichischer Rechnungshof. (2010a). Auswirkungen der Personalhoheit auf die 

Gesamtkostensituation der Universität Wien und der Wirtschaftsuniversität Wien. Retrieved 
from 
http://www.rechnungshof.gv.at/fileadmin/downloads/2010/berichte/teilberichte/bund/bund_
2010_01/Bund_2010_01_4.pdf 

Österreichischer Rechnungshof. (2010b). Bericht des Rechnungshofes – Fachhochschulwesen. 

Retrieved from 
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10_01.pdf 

Österreichischer Rechnungshof. (2011). Bericht des Rechnungshofes – Universitätslehrgänge. 

Retrieved from 
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2011_11/Bund_2011_11_3.pdf 

Österreichischer Rechnungshof. (2012). Bericht des Rechnungshofes – Leistungsvereinbarungen. 

Retrieved from 
http://www.rechnungshof.gv.at/fileadmin/downloads/2012/berichte/teilberichte/bund/Bund_
2012_11/Bund_2012_11_4.pdf 

Österreichischer Wissenschaftsrat. (2012). Fachhochschulen im österreichischen 
Hochschulsystem. Analysen, Perspektiven, Empfehlungen. Vienna: Author. 

Pechar, H., & Wroblewski, A. (2002). Retrospektive Schätzung studienaktiver Universitäten der 

Wissenschaften für 1996/97 – 2000/01. Project report to the BMBWK. Vienna: BMBWK. 
Retrieved from http://www.equi.at/dateien/stb_monit_pechar.pdf  

Schomburg, H., Flöther, C., Wolf, V., Kolb, K., & Guggenberger, H. (2010). Arbeitssituation 

von Universitäts- und FachhochschulabsolventInnen. Studie im Auftrag des 
Bundesministeriums für Wissenschaft und Forschung. Kassel: Internationales Zentrum für 
Hochschulforschung Kassel (INCHER). 

Statistik Austria. (2011). Bildung in Zahlen 2009/10. Schlüsselindikatoren und Analysen. Wien: 

Statistik Austria. Retrieved from 

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http://www.statistik.at/dynamic/wcmsprod/idcplg?IdcService=GET_NATIVE_FILE&dID=
93359&dDocName=055469 

Thaler, B., & Unger, M. (2013). Finanzielle Situation von Studierenden an österreichischen 
Universitäten (survey commissioned by the Austrian Union of Students ÖH). Austrain 
Union of Students. Retrieved from 
http://www.oeh.ac.at/fileadmin/user_upload/pdf/Presse/FinSit_Tabellenband_25_01.pdf 

Unger, M., Dünser, L., Fessler, A., Grabher, A., Hartl, J., Laimer, B., … Zaussinger, S. (2012). 
Studierenden- Sozialerhebung 2011 Bericht zur sozialen Lage der Studierenden. Band 1: 
Hochschulzugang und StudienanfängerInnen. Studie im Auftrag des Bundesministeriums für 
Wissenschaft und Forschung (BMWF). Vienna: Institut für Höhere Studien (IHS). 

Unger, M., Dünser, L., Thaler, B., & Laimer, A. (2011). Evaluierung des formelgebundenen 

Budgets der Universitäten. Project Report. Vienna: Institut für Höhere Studien (IHS). 

Unger, M., Zaussinger, S., Angel, S., Dünster, L., Grabher, A., Hartl, J., … Gottwald, R. (2010). 
Studierenden-Sozialerhebung 2009. Bericht zur sozialen Lage der Studierenden. Studie im 
Auftrag des Bundesministeriums für Wissenschaft und Forschung (BMWF). Vienna: Institut 
für Höhere Studien (IHS). 

Wroblewski, A., & Unger, M. (2002). Studierenden-Sozialerhebung 2002. Bericht zur sozialen 

Lage der Studierenden. Studie im Auftrag des Bundesministeriums für Wissenschaft und 
Forschung (BMWF). Vienna: Institut für Höhere Studien (IHS). 

Wroblewski, A., & Unger, M. (2006). Studierenden-Sozialerhebung 2006. Bericht zur sozialen 

Lage der Studierenden. Studie im Auftrag des Bundesministeriums für Wissenschaft und 
Forschung (BMWF). Vienna: Institut für Höhere Studien (IHS). 

Zaussinger, S., Grabher, A., Dünser, L., Laimer, A., & Unger, M. (2011). Internationale 

Studierende. Zusatzbericht der Studierenden-Sozialerhebung 2011. Vienna: Institut für 
Höhere Studien (IHS). 

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APPENDIX: LIST OF INTERVIEWED EXPERTS 

Name 

Position / Affiliation 

Christoph Badelt 

Formerly: President of Austrian rectors’ 
conference (UNIKO) 
At present: Rector of the Vienna University 
for Economics and Business 

Interviewed 

June 2013 

Friedrich Faulhammer 

Formerly: Secretary general at the Federal 
Ministry of Science and Research (BMWF) 
At present: Rector of the Danube University 
Krems 

June 2013 

Kurt Koleznik 

Michael Landertshammer 

June 2013 

August 2013 

Secretary general 
Association of Austrian Universities of 
Applied Sciences (FHK) 

Formerly: Rector of the University of 
Applied Sciences for Management & 
Communication (FH Wien)  

At present: Head of the department on 
education policy 
Austrian federal chamber of commerce 
(WKÖ) 

Sigrid Maurer 

Formerly: President of the Austrian 
Students’ Union (ÖH) 

June 2013 

At present: Member of federal parliament 
(Nationalrat, Green Party) 

Director 
Department ‘Higher Education Institutions 
in the Knowledgebase Society’ 
Institute of Science Communication and 
Higher Education Research, University of 
Klagenfurt 

June 2013 

Formerly: Director 
Fachhochschulrat (predecessor of AQ 
Austria) 
At present: Head of department for quality 

June 2013 

Hans Pechar 

Kurt Sohm 

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management 
Fachhochschule Technikum Wien 

Werner Tessmar-Pfohl 

Formerly: University council member 
University of Graz 

June 2013 

At present: Chairman of the supervisory 
board 
Sattler Group 

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National Report for Canada 

CANADA 

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1.  INTRODUCTION 

1.1  Overview of Higher Education in Canada 

Historically, the Canadian education system has been shaped by the division of the country into a 
French  speaking  and  an  English  speaking  part,  dating  back  to  the  time  of  colonisation.  The 
essence of the bargain which permitted a federal state to come into existence in 1867 was that the 
English Protestant-dominated colonies would be able to run a federal government provided that 
education would remain the responsibility of the provincial governments so that French Catholic 
Quebec  could  stay  in  control  of  its  own  education  system.  As  a  result,  Canada  has  not  one 
system  of  higher  education  but  ten  (thirteen  if  one  counts  the  tiny,  one-institution  systems  in 
place  in  the  three  northern  territories).  They  are  distinguished  from  one  another  mainly  in  the 
role assigned to the community colleges. 

In  nine  provinces,  higher  education  starts  after  12  years  (plus  kindergarten)  of  compulsory 
schooling  (i.e.  at  age  18).  At  this  point,  a  student  may  choose  between  a  Bachelor  degree 
programme  (mainly  but  not  exclusively  delivered  at  universities)  and  a  set  of  sub-degree 
credentials  (diplomas  or  certificates)  offered  mainly  by  public  community  colleges.  Quebec 
operates under a different system; there, 11  years of compulsory schooling is followed by two 
years at a College d’Enseignement General et Professionel (CEGEP), at which one may either 
obtain a vocational certificate or Diplome d’Education Collegial (DEC) which permits access to 
one  of  the  province’s  universities.  Bachelor’s  degrees  in  Quebec  are  mostly  of  three-year’s 
duration; in the rest of Canada they are mainly of four years’ duration, meaning that across the 
country 16 years of schooling to a Bachelor degree is the standard.  

As  noted  above,  universities deliver  most  Bachelors  –  that is,  ISCED  5A  –  degrees.  However, 
over  the  past  two  decades,  community  colleges  in  the  five  westernmost  provinces  have  begun 
issuing degrees as well. In some cases, this has been a prelude to a college being turned into a 
university  (this  has  occurred  in  seven  institutions  in  Alberta  and  British  Columbia);  more 
recently,  the  kinds  of  degrees  being  given  out  are  what  are  called  ‘applied  Bachelor  degrees’; 
that  is,  more  vocationally-oriented  5A  certifications  reminiscent  of  what  one  sees  at  German 
Fachochschulen  or  Finnish  polytechnics.  But  this  is  the  exception  rather  than  the  rule;  more 
generally,  Canadian  community  colleges  help  students  obtain  short-duration  (3  years  or  less) 
terminal  professional  certifications  which  are  classified  as  5B  under  ISCED  and  which  would 
normally go under the title of ‘further education’. 

Private  higher  education  in  Canada  comes  in  two  varieties:  the  first  are  what  are  known  as 
‘career  colleges’  which  tend  to  offer  very  short-term  (usually  one  year  or  less)  professional 
education in a wide variety of areas like office administration, music production, pet grooming 
etc. These are structurally very similar to for-profit institutions in the United States except they 
offer much shorter programmes. There are several hundred such institutions in Canada teaching 

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somewhere between 130,000 and 170,000 students per year, but we do not consider these in this 
paper. The second are private, non-profit degree-granting institutions, of which there are about a 
dozen in Canada. With the exception of Quest University in British Columbia, all of these are 
religiously-affiliated institutions, very few have enrolments over 500 students and their share of 
national enrolment is less than 2%.15 By convention, they are not analysed as a separate category 
and are just lumped with university/Bachelor-level education. 

Part of the reason that Canada does not have a larger private sector in education is that various 
regulatory regimes have essentially prohibited them until quite recently. But mostly, it is simply 
that Canada’s public sector-universities (including the private institutions which have chosen to 
accept public funding and hence public regulation) and its system of community colleges are by 
international standards extremely well-funded and are capable of delivering quality education in 
virtually all fields.  In consequence, there has simply never been much of a need or a niche for 
private  higher  education.  In  fact,  the  reverse  is  the  case  –  over  the  course  of  the  twentieth 
century,  many  private  universities  such  as  McGill,  Queen’s  and  Laval  began  accepting  public 
funding  and  became  indistinguishable  from  public  universities  themselves.  Around  the  world, 
private higher education tends to succeed because it can offer things at a reasonable price that the 
public sector – usually because of insufficient funding – cannot. In Canada, the public system is 
sufficiently  well-funded  that  there  are  very  few  programmes  it  cannot  provide.  As  a  result, 
private institutions have almost no niche in which to thrive. 

One  consequence  of  having  a  well-funded,  fully  public  system  is  that  Canada’s  system  of 
external  quality  assurance  regime  lags  those  of  other  countries,  and  not  just  because  it’s 
constitutional  set-up  prevents  it  from  having  a  single  national  regulator.  Canadian  public 
universities,  which  until  the  late  90s held  a  monopoly  over  the  granting  of  degrees  in Canada, 
had an extremely good name both domestically and internationally, even in the absence of any 
serious  external  quality  assurance.  It  was  the  desire  of  some  governments  to  inject  some 
competition  in  the  system  and  open  the  door  both  to  colleges  offering  Bachelor-level 
programmes  and  to  private-sector  providers  (which  in  the  event  never  really  panned  out),  that 
created the impetus for the creation of quality assurance agencies as some means was needed to 
ensure  that  people  believed  that  these  new  degrees  were  ‘equal’  to  degrees  offered  in  existing 
universities.  At  the  time  of  writing,  eight  provinces  have  some  form  of  external  quality 
assurance. 

1.2  Key Higher Education Stakeholders 

The  Federal  Government  does  not play  a  direct  role  in  education.  However,  the department  of 
Employment and Social Development Canada runs the Canada Student Loans Program, which is 
of importance to institutional funding, and the department of Industry Canada oversees the work 

15 There are a large number of Canadian institutions in the eastern part of the country – Laval, McGill, Queen’s, etc. 
– which are technically private in the sense that they were not created by acts of the legislatures and their Boards of 
Governors are entirely selected by the university community itself. However, because they accept public funding 
and the rules that go with them, they are always referred to as ‘public’ institutions; the OECD’s appellation 
‘publicly-funded private institution’ would be more accurate, but it has simply never caught on. By convention, 
these are included with ‘public universities.’  

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of the three research granting councils (the Social Science and Humanities Research Council, the 
National  Science  and  Engineering  Research  Council  and  the  Canadian  Institutes  of  Health 
Research) as well as the Canada Foundation for Innovation, which funds research infrastructure. 
A  variety  of  other  departments,  such  as  Health,  Agriculture,  Fisheries  and  Oceans,  etc.,  also 
provide some limited science and technology funding to institutions. 

At the provincial level, each of the ten provinces has a ministry devoted to higher education. In 
most provinces, education and higher education are separate ministries; though this can change 
from  time  to  time  (governments  can  combine  or  separate  these  ministries  at  will).  If  higher 
education is separate from education, it is sometimes combined with other portfolios (most often 
Labour  or  Employment).  Provinces  each  have  their  own  study  aid  system;  Quebec’s  study  aid 
system  is  separate  from  the  federal  programme  (though  it  receives  compensatory  opt-out 
money),  while  the  other  nine  provinces  have  programmes  that  are  integrated  -  not  always 
comfortably – with the federal programme.  

In most provinces, governments fund institutions directly without intermediary bodies (Manitoba 
and New Brunswick are the exceptions). Ontario has a higher education ‘quality council’ which 
‘advises’ on funding matters but in practice works more like a government think-tank. 

Despite the relatively limited levels of power held by the federal government in Ottawa, most of 
the ‘apex’ stakeholder organisations are in this city the Association of Universities and Colleges 
of  Canada  (AUCC),  the  Association of  Canadian Community  Colleges  (ACCC),  the  Canadian 
Association of University Teachers (CAUT), the Canadian Federation of Students (CFS) and the 
Canadian  Alliance  of  Student  Associations  (CASA).  In  the  larger  provinces,  these  different 
stakeholder  groups  will  have  provincial  equivalents,  but  in  many  provinces,  institutions  or 
student unions simply represent themselves without a federation.  

1.3  How Governments Fund Institutions 

As  noted  above,  the  Government  of  Canada  has  no  role  in  funding  institutional  operations 
(though it does fund the national military college in Kingston). It does, however, make a variety 
of  transfer  payments  to  the  provinces  which  are  more  or  less  unconditional.  The  first,  called 
‘Equalisation’ is a transfer which is given to provinces with below-median levels of income so 
that they can provide services at a level comparable to those in richer provinces. There are two 
other  major  transfers  that  are  made  from  the  federal  to provincial  governments  on the basis  of 
population: the Canada Health Transfer and the Canada Social Transfer. One-quarter of the latter 
– roughly 3 billion dollars - is considered to be ‘for’ post-secondary education though there are 
no  formal  accountability  measures  with  respect  to  this  money;  it  simply  goes  into  provincial 
consolidated revenue funds.  

The  Government  of  Canada  has  two  other  means  of  funding  higher  education.  The  first  is 
through research; despite the prohibition on being involved in ‘education’, the government has 
since  the  1950s  carved  out  a  niche  in  terms  of  funding  science.  For  the  most  part,  this  has 
involved  granting  councils  providing  funds  to  individual  researchers  through  a  standard  peer-
review  mechanism.  Since  1997,  this  has  been  accompanied  by  a  dedicated  fund  for  campus 

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research  infrastructure  via  an  intermediary  body  known  as  the  Canada  Foundation  for 
Innovation. The second is student assistance. In nine provinces and one territory, the federal and 
provincial  governments  share  responsibility  for  student  assistance;  for  most  students,  the 
eligibility and need criteria are harmonised, meaning that although students receive loans from 
both federal and provincial government, the process is managed through a single application. In 
the  remaining  province  (Quebec)  and  two  territories,  the  province/territory  has  exclusive 
jurisdiction and receive compensation from the federal government for having opted-out.  

Provincial governments have a variety of ways of funding institutions. In Nova Scotia, Quebec, 
Ontario,  and  Alberta,  the  primary  method  of  delivering  funding  to  institutions  is  formula 
funding.  The  formulas  differ  from  one  jurisdiction  to  another,  but  in  the  main,  they  are 
enrolment-based,  with  weights  applied  for  different  fields  and  levels  of  study.  In  British 
Columbia, Manitoba, Prince Edward Island, and Newfoundland and Labrador, governments use 
what  are  usually  referred  to  as  ‘historical’  funding  formulas  –  that  is,  a  lump  sum  which  is 
usually  a  function  of  what  was  received  the previous  year  (e.g.  previous  year’s  allocation plus 
5%, or minus 2%, etc.). Two provinces – New Brunswick and Saskatchewan – use a mix of the 
two, though the former is predominantly formula-based and the latter historically-based. Quebec, 
Ontario and Alberta all have small performance-based funding envelopes, but they account for 
less than 2% of all spending; Ontario, Saskatchewan, Alberta and British Columbia all reserve a 
certain portion of funding for implementation of strategic initiatives. 

Over  the  past  twenty  years  there  have  been  very  few  changes  to  these  models.  The  biggest 
change  was  in  Nova  Scotia,  which  in  1999  switched  from  the  historical  model  to  a  formula 
model. Quebec, Ontario and Alberta all added their performance elements in the mid-1990s but 
these  were  relatively  small.  There  have  occasionally  been  schemes  – particularly  in  Ontario  in 
the  latter  half  of  the  2000s  –  to  increase  graduate  student  enrolments.  But  for  the  bulk  of  the 
period, for institutions serving a majority of students in the country, the main financial incentive 
was simply to increase enrolments.  

1.4  History of Cost-Sharing 

Apart from a brief period in Newfoundland in the 1960s, tuition fees have always been a part of 
the funding equation in Canadian higher education. With very rare exceptions (primarily relating 
to  professional  Masters  degrees  in  business/administration)  fees  are  formally  or  informally 
regulated  by  provincial  governments.  In  general  undergraduate  programmes,  costs  will  vary 
slightly  from  institution  to  institution  and  programme  to  programme;  fee  variation  is  more 
pronounced in graduate and professional programmes. Most governments make decisions on fees 
on  an  annual  basis.  Canadian  fee  policy  is  thus  characterised  by  a  series  of  very  gradual 
adjustments rather than episodic, major adjustments on the recent UK model. The  exception is 
where a province has had a long-standing fee-freeze in place, such as British Columbia in 2001, 
or when a significant increase is proposed after a long period of small increases, as in Quebec in 
2012. 

During the post-war period, tuition fees were relatively high (that is, close to their current levels, 
in real dollars). Throughout the late 60s and 70s, average tuition tended to fall in real terms as 

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nominal tuition was either frozen or increased at below the rate of inflation. Through the 1980s, 
tuition more or less ran even with inflation.  

However,  at  the  start  of  the  1990s,  Canada’s  federal  and  provincial  governments  faced  fiscal 
challenge of the scale of those currently facing Europe. This resulted in a significant contraction 
of  the  public  sector,  including  transfers  to  institutions.  To  compensate,  governments  in  most 
provinces  allowed  institutions  to  raise  tuition  significantly.  This  caused  a  relatively  significant 
shift in operating grant funding in the 1990s. Initially, student assistance systems expanded their 
loan  portfolios  to  help  students  pay  for  the  new  tuition  fees.  In  the  late  1990s,  however,  as 
economic conditions improved and fears grew about the amount of debt students were taking on, 
more  need-based  non-repayable  funds  entered  the  system.  There  was  also  a  very  significant 
increase in the amount of tax credits available for education. Since about 2000, average tuition 
has  risen  faster  than  inflation,  increases  in  study  aid  and  tax  credits  have  offset  a  substantial 
portion of these increases, meaning the actual increase in net tuition is significantly lower than 
the increase in the posted price.  

Over time, provincial policies on fees have led to an ever-widening spread between the least- and 
most-expensive  provinces.  As  of  2013,  the  province  with  the  highest  fees  (Ontario)  has  fees 
approximately three times as high as those in the lowest-fee province (Quebec).  

This  paper  will  make  use  of  ‘laboratory  federalism’  and  the  diversity  of  provincial  policy 
responses to examine the effects of different tuition policies within the same broad economic and 
social  framework.  Specifically,  we  will  be  focusing  on  four  specific  provinces  which  have 
followed quite different fee policies: 

  Ontario, which has allowed fees to climb steadily throughout the last 20 years.  
  British Columbia, which saw frozen fees in the late 90s, followed by a large and rapid 
increase in fees (roughly 55%) in 2001-2003 but kept fees relatively steady in real terms 
thereafter.  

  Quebec, which kept fees more or less frozen in real terms after 1992 (the policy varied 

between a complete freeze and a policy of keeping up with inflation),  

  Newfoundland allowed fees to rise throughout the 1990s, but then rolled back fees 5% 
per year for four years in 2000, since which time tuition has been kept frozen in nominal 
terms.  

There have been no real developments or innovations with respect to forms of cost-sharing other 
than tuition.  Universities  in  Canada have  –  and  have  always  had  – almost  complete  autonomy 
over  institutional  financing,  especially  with  respect  to  the  use  of  dollars  earned  through 
fundraising and other self-financing activities.  

Student assistance is another key element of cost-sharing. As noted earlier, it is an area of shared 
jurisdiction  between  federal  and  provincial  governments,  and  so  the  system  looks  slightly 
different  in  each  province.  The  general  principles,  however,  are  the  same  everywhere:  aid  is 
based  on  ‘assessed  need’,  which  is  equal  to  ‘assessed  costs’  minus  ‘assessed  resources’.  Only 
about 40% of students receive aid in any given year; over the course of a degree, the figure rises 
to  about  55%.  In  all  provinces,  there  has  always  been  a  mix  of  loans  and  grants,  though  the 

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composition of such aid varies by province and over time.  Generally speaking, loans are more 
used than grants. Until about 2005, students in most provinces had to have need of 6,000 dollars 
or  more  before  they  were  eligible  for  grants  (the  first  6,000  dollars  or  so  being  met  through 
loans). The threshold in Quebec was noticeably lower, but the need assessment criteria were also 
stricter, meaning it was harder to have assessed need. 

Due to fiscal pressures, many provincial governments cut back their grant schemes in the early-
to-mid-1990s.  As  this  occurred  at  about  the  same  time  that  funds  to  institutions  were  also  cut 
back  and  tuition  was  allowed  to  rise,  debt  levels  rose  quite  quickly  in  this  period.  By  the  late 
1990s, both levels of governments felt the policy pendulum had swung too far in one direction 
and began offering more grants through a variety of mechanisms. For most of the 2000s, the ratio 
of loans issued to non-repayable aid issues was between 2.5 and 3 to 1. 

Loan repayment in Canada is usually described as being ‘mortgage-style’ as opposed to income-
contingent.  And  it  is  certainly  true  that  Canada  has  not  made  use  of  the  tax  system  to  collect 
loans  as  countries  like  Australia  have  done.  However,  the  Canadian  system  has  been  adding 
income-contingent  elements  for  some  time,  first  through  its  interest  relief  system,  then  its 
income-based repayment system and finally through the Repayment Assistance Plan. Eligibility 
for  post-graduation  assistance  is  based  on  a  complicated  and  generally  badly-communicated 
formula, but in practice, students with average levels of debt neither pay interest nor principalif 
their  incomes  are  below  about  23,000  dollars  per  year;  above  that  level,  they  may  pay  partial 
amounts of their loans, with government covering the rest. 

Another  peculiar  aspect  of  cost-sharing  in  Canada  is  the  practice  of  providing  educational  tax 
credits.  These  began  in  the  1960s  as  tax  deductions,  and  were  seen  as  a  way  for  the  federal 
government  to  provide  aid  to  students  without  crossing  the  constitutional  barrier  regarding 
education (this was prior to the introduction of Canada Student Loans); because of the way the 
tax system then worked, offering deductions at the federal level also impacted provincial taxes as 
well, meaning students (or their families, since the benefit was transferable) got a break on both 
sets of taxes. There were two sets of deductions – one for the value of tuition, and the other an 
‘education amount’, a set amount per month of study in respect of general education costs.  

In the early 1990s, the deductions were converted to credits so they were no longer regressive. In 
the  late  1990s,  the  Government  of  Canada  began  increasing  the  value  of  both  credits 
significantly; the tuition  fee credit was amended to include all ancillary  fees and the education 
amount moved up in size in stages from 60 dollars per month in 1995 to 400 dollars per month in 
2000. By this time, provincial tax systems were partially de-coupled from federal ones, so this 
increase did not entirely carry over to the provincial tax system, though some provinces (notably 
Ontario and Alberta) actually increased their credits more than did the federal governments. In 
the early 2000s, some smaller provinces that were increasingly desperate to retain young people 
began  offering  graduates  rebates  on  tuition  fees  already  paid  through  the  tax  system  (i.e.  they 
could offset their taxes with credits for tuition previously paid).  

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1.5  History of Enrolment  

In Canada, students apply directly to the institutions they wish to attend, and institutions have the 
right  to  accept  or  reject  whom  they  wish.  Apart  from  Alberta,  there  is  no  secondary  school 
matriculation exam, and there are no national or institutional entrance exams either; admission is 
based solely on secondary school exams. Depending on their level of prestige (which is usually a 
function of research-intensiveness), institutions can be more or less selective. At top institutions, 
it is difficult to obtain entry with secondary school marks below 85%; but as long as one’s marks 
are  above  70,  there  are  almost  always  alternatives  nearby  which  are  relatively  easy  to  enter. 
Below those kinds of marks, community colleges are for the most part open access (that is, they 
will admit anyone, subject to availability of places), though as demand rises for their Bachelor 
programmes  and  certain  specialty  diploma  programmes,  selective  applications  are  being 
introduced in some areas.  

As  Figure 1.1 shows, Bachelor level  enrolment has been  rising steadily since about 2000, with 
total enrolments being roughly 50 per cent higher in 2010 than they  were twelve  years earlier. 
Some of the initial rise was thought to have been temporary, as Ontario shifted from a 13-year 
primary-secondary system to a 12-year one in 2002-3, thus creating a ‘double-cohort’ of students 
entering the system. However, enrolments continued increasing even after that one-off event. To 
a very limited extent, in British Columbia and Alberta, the increases in universities enrolments 
reflect a change in status of a certain number of institutions from colleges to universities. But as 
the figure clearly shows, university enrolment growth has not been at the expense of the colleges. 

Figure 1.1: Total undergraduate enrolment (1995-2010) 

1 000 000

900 000

800 000

700 000

600 000

500 000

400 000

300 000

200 000

100 000

0

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Universities

Non-universities

Source: Post-secondary student information system. 

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Figures  1.2  and  1.3  deconstruct  the  university  enrolment  figures  somewhat  to  provide  a  more 
nuanced look at full and part-time enrolments.16 As Figure 1.2 demonstrates, full-time students 
make up the bulk of the undergraduate student body, and the trend if anything is towards full-
time study. The percentage of the undergraduate student body that was part-time fell from 25% 
in 1992 (it was actually reached an all-time high of about 30% in the late 1980s) to just 15% in 
2003 before recovering slightly at the end of the decade. 

A note should be made here with respect to the notion of ‘full-time equivalent’ (FTE) students. 
There is not a standard definition of full-time equivalency across the country. It tends not to be 
used  by  provincial  governments  for  funding  formula  because  they  prefer  to  use  actual  credit 
hours  as  a  basis  for  funding  formulae.  What  is  used  here  is  the  Statistics  Canada  definition, 
which  posits  that  3.5  part-time  students  =  1  full-time  student.  How  close  this  definition  is  to 
reality at any given point in time is difficult to say; it is, however, a standard definition which has 
consistently been used by a major pan-Canadian authority, and so we continue its use here.  

Figure 1.2: Full-time, part-time and FTE undergraduate students (1992-2010) 

 1 000 000

 800 000

 600 000

 400 000

 200 000

 -

1992199319941995199619971998199920002001200220032004200520062007200820092010

Full-time

Part-time

FTE

Source: Post-Secondary Student Information System. 

In the previous section it was noted that over the course  of this paper we would provide more 
intensive  coverage  of  changes  in  four  specific  provinces  selected  because  of  their  differing 
policy choices over the years: British Columbia, Ontario, Quebec and Newfoundland. Figure 1.3 
looks  at  enrolments  in  these  four  provinces.  The  changes  are  indexed  because  the  vast 
differences  in  the  size  of  the  provinces  in  question  make  it  difficult  to  portray  changes  in 
absolute numbers; (Ontario has over 300,000 students; Newfoundland under 20,000). Here, we 
see that the changes in enrolment were not consistent across provinces. In British Columbia, FTE 
enrolment  grew  by  90%,  though  this  in  part  was  due  to  the  conversion  of  several  institutions 
from  college  to  university  status.  In  Ontario,  enrolment  was  up  just  over  60%.  In  the  two 
provinces where tuition was frozen or declined, enrolment gains were much smaller – just 20% 
in Quebec and 0% in Newfoundland. 

16 The definition of full-time and part-time can vary somewhat from institution to institution and is not a nationally 
consistent definition. Generally speaking though, ‘full-time’ means 80% or more of a full course load, which usually 
means 12 or more hours of class/lab-time per week. 

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Figure 1.3: Indexed change in FTE university enrolment, Select Provinces (1992-
2010) 

200
180
160
140
120
100
80
60
40
20
0

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Source: Post-Secondary Student information Systems. 

NL

QC

ON

BC

Figure 1.4 shows the participation rate among university students aged 18-21 in Canada. These 
roughly show the same story as does Figure 1.1: rates were stable through the 1990s, and then 
increased quickly after 1999.  

Figure 1.4: University participation rates of 18-21 year-olds (1992-2010) 

30%

25%

20%

15%

10%

5%

0%

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Source: Post-Secondary Student information Systems, Statistics Canada post-censal population estimates. 

Figure 1.5 shows the same story for the four sample provinces. Here we use slightly different age 
ranges  in  order  to  ensure  effective  comparability  across  provinces  because  18-21  was  not  the 
‘best  four  years’  (that  is,  the  age-years  for  which  they  have  the  highest  participation)  in  all 
provinces in all years in this period. In Newfoundland and British Columbia, the ‘best four years’ 
was  always  18-21.  In  Quebec,  it  was  always  19-22  because  of  the  extra  year  of  College 
d’Enseignement General et Professionel (CEGEP) before starting university. In Ontario, the best 

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four  years  changed  over  the  course  of  the  period  in  question  as  a  result  of  the  elimination  of 
Ontario Academic Credits and what was in effect for many students a seventh year of secondary 
school. Prior to 2004, the best four years were 19-22, after that it became the same 18-21 seen in 
the rest of the country outside Quebec. 

As  Figure  1.5  shows,  different  provinces  have  very  different  participation  profiles.  The  gap 
between  Ontario  and  British  Columbia,  for  example,  is  thirteen  or  fourteen  percentage  points 
more or less right through the entire period. All provincial participation rates rose, but some went 
up more than others. British Columbia, Newfoundland and Ontario all saw increases in the 8-10 
percentage point range over the period, while Quebec’s rose by about 5 percentage points. The 
rise  in  Newfoundland  is  probably  the  one  that  needs  most  explaining,  given  that  Figure  1.2 
shows no increase whatsoever in FTE enrolments. Two points explain the discrepancy. The first 
is that the province saw an enormous decline in its population over the 1990s and 2000s due to 
adverse  economic  conditions  –  so  staying  level  in  enrolments  in  fact  represents  a  substantial 
improvement in access as a percentage of the youth population. The second is that some of the 
increase (or maintenance of current enrolment levels, depending on how one chooses to look at) 
is a substitution effect. For many years, it was quite common for Newfoundland students to go 
away  to  Nova  Scotia  or  other  maritime  provinces  for  university).  By  the  middle  of  the  2000s, 
that  flow  had  mostly  dried up  as  the  cost differential  between  Nova  Scotia and  Newfoundland 
became  so  wide  that  more  and  more  Newfoundlanders  stayed  at  home.  So  to  some  extent,  the 
increasing  participation  rate  is  actually  an  increase  in  the  participation  rates  of  Newfoundland 
students at Newfoundland institutions, rather than an increase in participation in any university-
level education. 

Figure 1.5: University participation rates, Selected Provinces (1992-2010) 

35%

30%

25%

20%

15%

10%

5%

0%

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

NL

QC

ON

BC

Note: Rates are for the ‘best four years’, i.e., the ages when entry is highest: NL: 18-21; QC: 19-22; ON: 19-22 prior 
to 2004, 18-21 thereafter; BC: 18-21. 
Source: Post-Secondary Student information Systems, Statistics Canada post-censal population estimates. 

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Is there a reason why increases in enrolments started around 2000? One key policy factor seems 
to be the arrival of substantial new money. The 1990s were an era of budget restraint; the 2000s 
were  a  period  of  improving  public  finances  and  (as  we  shall  see  in  Chapter  2)  improving 
university finances. Put simply: money for expansion was there in the 2000s in a way that it was 
not  in  the  1990s.  Since  institutions  have  control  of  their  own  admissions  policies,  a  freeze  on 
new admissions would have been a rational way to contain costs during an era of austerity. 

If this were true, one might suspect that there was a lot of unmet demand for university places in 
the  1990s,  and that  a  lot  of  the  growth in the  2000s  was  really  this  demand that had not  been 
fulfilled in the 1990s. Unfortunately, this is not a testable proposition. To test it, one would need 
data on the number of unduplicated applicants and the number of new enrolments. Canada does 
not have the former because each institution runs its own application system and there is no way 
to eliminate duplicate applications; and it does not have the latter because ‘new enrolments’ are 
not centrally tracked by any authority.  

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2.  HYPOTHESIS A: AS PRIVATE FUNDING INCREASES, 

INSTITUTIONAL REVENUE INCREASES  

This  chapter  looks  at  data  relevant  to  Hypothesis  A,  which  states  that  as  private  funding 
increases,  institutional  revenue  increases,  but  only  if  public  funding  remains  constant.  That 
means that it will examine whether: 
 
 
 

there has been an increase in private funding 
there has been a concurrent change to public funding 
there has been a total increase in funding and how this is related to changes in private and 
public revenues. 

Changes  in institutional  funding  will  be  considered  both  in  terms  of  total  institutional  revenue 
and relative to the number of students. 

2.1  Changes in Institutional Revenues over Time 

Data on university expenditures are easily obtained in Canada. Since the early 1980s, Statistics 
Canada and the Canadian Association of University Business Officers have conducted an annual 
survey  of  institutions  on  income  and  expenditure  by  type  and  category.  This  permits  an  easy 
examination of trends over time. 

As  noted  above,  in  the  mid-1990s,  Canadian  universities  underwent  some  difficult  times. 
Revenues from government declined in real dollars; however, tuition fees were permitted to rise 
substantially  to  compensate. Between 1992 and  1997, total university  revenues  stayed  more  or 
less constant at around 15 billion dollars in real terms, but the share coming from governments 
(both federal and provincial, both for operating funds and research) dropped from about 65% to 
55%. Income from student fees rose from 14% of the total to 20% over the period, while ‘other 
income’ – which includes all of institutions’ self-generated income from ancillary enterprises and 
endowment income – rose from 20% to 25%.  

Between  1997  and  2010,  university  revenues  doubled  in  real  dollars,  while  the  distribution  of 
funding  by  source  remained  almost  exactly  as  it  was  thirteen  years  earlier  (54%  government, 
21% students and 25% ‘other private’). The only significant change in the intervening years was 
a  one-year  aberration  in  2008  when  ‘other’  revenue  plummeted  as  investment  returns  went 
sharply negative during the opening phases of the Global Financial Crisis. 

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Figure 2.1: Total university revenue by source, in billions of dollars17 

 $35

 $30

 $25

 $20

 $15

 $10

 $5

 $-

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Government

Students

Other Private

Note: In Canadian dollars. Constant prices (2012). 
Source: CAUBO/Statistics Canada Financial Information of Universities and Colleges (FIUC) Survey 

Figures 2.2 through 2.5 portray the same data for each of our four test provinces. The stories they 
tell  are  not  exactly  the  same.  Ontario  saw  a  real  decline  in  government  funding  in  the  1990s 
which was mostly offset by increases in private funding; this was followed by a decade in which 
growth came quite evenly from all sources of funding. Newfoundland had a similar experience to 
Ontario’s in the 1990s, but while public funding increased in the 2000s, private funding did not 
(due to a provincial tuition freeze and a stable student population). Quebec’s pattern was similar 
to Newfoundland’s, only with a larger fall in funding in the 1990s, and a much weaker growth in 
public  funding  in  the  2000s.  British  Columbia  is  the  outlier,  the  only  province  where  income 
from government never fell during the period in question. What is invariably true across all four 
provinces, is that universities tended to get less money in the 1990s when public finances were in 
trouble,  and  got  a  tremendous  amount  of  new  money  from  about  1999  onwards,  when  the 
economy improved.  

17 Note: all figures in this paper are in Canadian dollars. Exchange rates have fluctuated over time, but as of October 
2013, the exchange rate is 1 Canadian dollar = 0.713 euros. 

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Figure 2.2: Total university revenue by source, Ontario, in dollars 

14 000 000

12 000 000

10 000 000

8 000 000

6 000 000

4 000 000

2 000 000

0
1992199319941995199619971998199920002001200220032004200520062007200820092010

Government

Students

Other Private

Note: In Canadian dollars. Constant prices (2012). 
Source: CAUBO/Statistics Canada Financial Information of Universities and Colleges (FIUC) Survey 

Figure 2.3: Total university revenue by source, Newfoundland, in dollars 

700 000

600 000

500 000

400 000

300 000

200 000

100 000

0
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Government

Students

Other Private

Note: In Canadian dollars. Constant prices (2012). 
Source: CAUBO/Statistics Canada Financial Information of Universities and Colleges (FIUC) Survey 

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Figure 2.4: Total university revenue by source, Quebec, in dollars 

7 000 000

6 000 000

5 000 000

4 000 000

3 000 000

2 000 000

1 000 000

0
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Government

Students

Other Private

Note: In Canadian dollars. Constant prices (2012). 
Source: CAUBO/Statistics Canada Financial Information of Universities and Colleges (FIUC) Survey 

Figure 2.5: Total university revenue by source, British Columbia, in dollars 

5 000 000

4 500 000

4 000 000

3 500 000

3 000 000

2 500 000

2 000 000

1 500 000

1 000 000

500 000

0
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Government

Students

Other Private

Note: In Canadian dollars. Constant prices (2012). 
Source: CAUBO/Statistics Canada Financial Information of Universities and Colleges (FIUC) Survey 

Figures 2.6 through 2.8 compare how funding by source changed across each jurisdiction over 
time.  Figure  2.6  examines  how  income  from  government  changed  as  a  proportion  of  all 
spending. In all jurisdictions, the government proportion of total university income fell between 
1992  and  1999.  In  Quebec,  it  fell  only  seven  percentage  points;  in  Ontario,  it  fell  by  17 

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percentage points. But since 1999, the share has barely changed in any jurisdiction, even though 
(as was demonstrated above), public expenditure increased dramatically in this period. 

Figure 2.6: Proportion of income from governments as a share of total revenue, 
by Province (1992-2010) 

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

BC

ON

QC

NL

CA

Source: FIUC. 

Figure 2.7 shows how the share of income from student fees changed over time. Nationally, the 
share  of  total  revenue  coming  from  fees  rose  from  14  to  21%  over  the  period  in  question; 
however,  there  was  significant  diversity  of  policy  strategies  between  provinces.  In  Ontario, 
income  from  student  fees  rose  fairly  steadily  throughout  the  period.  In  Quebec,  it  stayed 
relatively flat. In British Columbia, it stayed flat until the 1990s and then rose quickly thereafter, 
whereas  in  Newfoundland  it  rose  at  rates  similar  to  those  in  Ontario  in  the  1990s  before 
plummeting in the period after 2000. 

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Figure 2.7: Proportion of income from student fees as a share of total revenue, 
by Province (1992-2010) 

35%

30%

25%

20%

15%

10%

5%

0%

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

BC

ON

QC

NL

CA

Source: FIUC. 

Figure 2.8 shows what happened to the revenue from ‘other sources’. Though provinces started 
from different bases, the share of income from this source rose in the 1990s and stayed more or 
less  constant throughout  the  2000s, with  the  exception  of the  exceptional  2008  year,  when  the 
Global Financial Crisis made investment returns briefly but sharply negative. 

Figure 2.8: Proportion of income from other private sources as a share of total 
revenue, by Province (1992-2010) 

35%

30%

25%

20%

15%

10%

5%

0%

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

BC

ON

QC

NL

CA

Source: FIUC. 

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To date, we have a complex picture. During the 1990s, the amount of money universities were 
receiving  from  public  and  private  sources  was  clearly  negatively-correlated.  However,  in  the 
2000s,  the  increases  were  positively  correlated;  that  is,  increases  in  income  from  private  and 
public sources went hand-in-hand. So much so, in fact, that the relative shares contributed by the 
three  main  sources  remained  almost  unchanged  despite  total  income  more  or  less  doubling. 
Private  contributions  to  universities  in  Canada  have  not  simply  replaced  public  ones,  though 
there have been times when this was the case.  

Another  way  of  examining  contributions  to  education  is  as  a  percentage  of  gross  national 
product.  Figure  2.9  shows  this  at  a  national  level.  The  graph  looks  somewhat  different  to  2.1, 
which ostensibly is showing the same thing. Here, total spending appears to fall in the mid-90s 
instead  of  remain  stable;  this  is  because  Canada’s  1990s  fiscal  problems  were  to  some  degree 
solved counter-cyclically, with many of the cuts and freezes coming after the worst of the 90-93 
recession. Hence, the effects of funding reductions in this period are magnified, with government 
funding falling from 0.99% of GDP in 1992 to 0.74% of GDP in 1997. Thereafter, government 
funding  slowly  recovers  until  by  2009  it  is  slightly  over  1%  of  GDP.  This  is  a  much  smaller 
increase than one would surmise from simply looking at Figure 2.1; what this means is that most 
of the increase one sees was due to economic recovery and only part can be explained through an 
increasing government commitment as a fraction of the overall economy 

Meanwhile,  income  from  students  and  ‘other  sources’  both  increase  steadily  throughout  the 
period, with the former going from 0.21% to 0.40% and the latter going from 0.29% to 0.45%. 
Aside from the events of 2008, swings of the economic pendulum made very little difference to 
the size of the contribution made by either of these sources: both increased by roughly 0.01% of 
GDP per year right through the period. 

Figure 2.9: University income by source as a percentage of GDP 

2,5%

2,0%

1,5%

1,0%

0,5%

0,0%

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Government

Student Fees

Other Private

Source: FIUC. 

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Finally, we can look at expenditures in terms of income per student. In figure 2.10, we see that 
the number of dollars per student increased by about 40% over our period, from 23,000 dollars 
per  student  to  about  34,000  dollars  per  student  (all  figures  in  constant  2012  dollars).  As  in 
previous graphs, we see a familiar pattern: income from student fees and other revenue increased 
steadily  throughout  the  period,  while  revenues  from  Government  fell  in  the  1990s  before 
recovering and surpassing previous highs.  

Figure 2.10: Income per student, in dollars (1992-2010) 

 $40 000

 $35 000

 $30 000

 $25 000

 $20 000

 $15 000

 $10 000

 $5 000

 $-

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Government

Student Fees

Other Private

Note: Canadian dollars. . Constant prices (2012). 
Source: FIUC. 

There can be no doubt there was significantly more money in Canadian universities in 2010 than 
there was in 1992. Whether we look in nominal dollars, real dollars, real dollars per student or as 
a percentage of  GDP, the answer is the same: income from each of the three principal sources 
has increased and hence total income has increased dramatically. 

2.2  Institutional Expenditures 

In the previous section we found that institutional income rose. In this section we explore how 
that revenue was used. 

In  Figure  2.11,  we  see  both  changes  in  income  per  FTE  student  (on  the  left-hand  side)  and 
changes  in  the  students-per-academic  staff  ratio.  Somewhat  counter-intuitively,  both  lines  rise 
over time. The students-per-academic staff ratio rose fairly steadily from 1992 to 2003 from 18:1 
to 22:1. In the period to 1998, the rise in the ratio was due to a fall of about 8% in the number of 
full-time  professors  (from  37,000 to 33,500)  18  while  student  numbers  stayed  constant.  One  of 

18 There is no centralised count of part-time, casual or adjunct faculty in Canada (and indeed, institutions themselves 
count these faculty in different ways). The faculty figures shown here are full-time figures only. We have chosen to 

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the  methods  used  to  cope  with  funding  problems  in  this  period  was  for  institutions  to  freeze 
hiring  and  allow  staff  numbers  to  fall  via  attrition.  From  1998  to  2003,  professor  numbers 
recovered  their  earlier  numbers,  but  the  rise  in  student  numbers  was  even  faster.  After  2003, 
student and professor numbers increased more or less in tandem, resulting in a stabilisation of the 
students-per-academic staff ratio at around 21.5 to 1. 

Figure2.11: Income per FTE student and students-per-academic staff ratio 

 $35 000

 $33 000

 $31 000

 $29 000

 $27 000

 $25 000

 $23 000

 $21 000

 $19 000

 $17 000

 $15 000

24

22

20

18

16

14

12

10

1992199319941995199619971998199920002001200220032004200520062007200820092010

$/FTE students (left axis)

FTE undergraduate students per academic staff 
Undergraduate FTE :FT prof (right axis)
member (right axis) 

Source: FIUC, University and Colleges Academic Staff System.  

In the period to 1998, the rise in the students-per-academic staff ratio was accompanied by stable 
per-student budgets; this was the period of declining government investment and rising private 
contributions.  But  from  1998  to  2003,  the  ratio  continued  rising  even  as  vast  new  amounts  of 
money continued pouring into the system; in other words, the number of students per academic 
staff member is rising even  while income per student is rising; from 1998 to 2003, dollars per 
student increased by 25% (most of this increase occurred from 1998 to 1999, since by 1999 all 
provinces were now increasing their funding) and students-per-academic staff ratios increased by 
roughly 10%. After that, while students-per-academic staff ratios more or less stayed constant, 
income per student continued to rise, albeit at a much slower pace, with the exception of the drop 
in 2008 when the financial crisis caused a decline in endowment funds, .  

To  the  extent  that  low  students-per-academic  staff  ratios  are  indicative  of  a  quality  learning 
environment, this is an odd result as it implies that learning conditions were getting worse even 
as income was rising. The explanation for this seems to be that a substantial amount of the new 
money going into universities were entering for purposes other than teaching. Figure 2.12 shows 
total  university  income  by  fund.  The  key  finding  in  this  graph  is  the  fact  that  research  funds 

include faculty with senior administrative duties; some of whom teach (albeit usually with a reduced load) and some 
of whom do not. As a percentage of the overall teaching population, this group varies from between about 20-25% 
of the overall professoriate 

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increased much more quickly than operating funds, particularly in the period from about 1998 to 
2003. Overall, operating funds were up 82% in real dollars, while research funds rose 178% and 
total  funds  rose  112%.  In  other  words,  the  increase  in  the  amount  of  money  available  to  the 
teaching enterprise was not quite as large as the headline figure might suggest. Still, the increase 
in  operating  funds  per  FTE  student  was  almost  58%  over  the  period  in  question;  the  fact  that 
students-per-academic staff ratios nevertheless increased by 26% over the same period suggests 
that  most  of  this  extra  money  went  to  things  like  increasing  capital  intensiveness,  salary 
increases and added administration. 

Figure 2.12: Income by fund, in dollars (1992-2010) 

 $35 000 000

 $30 000 000

 $25 000 000

 $20 000 000

 $15 000 000

 $10 000 000

 $5 000 000

 $-

General operating

Special purpose/trust

Sponsored Research

Ancillary enterprises

Capital/Plant

Endowment

Note: Canadian dollars. Constant prices (2012). 
Source: FIUC. 

Figure 2.12 begs the question: what happened to operating funds? The answer, more or less, is 
that all the major categories of expenditure increased, but some increased substantially more than 
others. As Figure 2.13 shows, academic salary stayed constant in real dollars through the 1990s 
and then began to rise fairly quickly – by 49% overall, in real terms, which is partly a function of 
greater  numbers  and  partly  a  function  of  increased  salaries.  ‘Other  salaries’  –  meaning  non-
academic salaries - grew faster in our period, but not wildly so (56% vs. 49% in the period 2000 
– 2010). The really large increases came in two smaller categories – benefits (which double) and 
scholarships  (which  increased  seven-fold),  most  of  which  went  towards  supporting  graduate 
students.  

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Figure 2.13: Operating fund expenditures (in thousands of dollars) by type 
(1992-2010) 

 $20 000 000

 $18 000 000

 $16 000 000

 $14 000 000

 $12 000 000

 $10 000 000

 $8 000 000

 $6 000 000

 $4 000 000

 $2 000 000

 $-

Academic Salaries

Oth Salaries and Wages

Benefits

Oth instruction/research

Scholarships

Other

Note: Canadian dollars. Constant prices (2012). 
Source: FIUC. 

For the most part, then, the evidence does not suggest that there was a major system change. It 
simply  suggests  that  the  system  became  more  expensive,  more  focused  on  research,  and  less 
focused on undergraduate teaching.  

2.3  Evaluation 

The best way to evaluate the data we have seen here is to divide the period into three eras: one of 
austerity (1993-1998), one of growth (1998-2005) and one of consolidation (2004-2010). 

During  the  eras  of  austerity,  increased  income  from  private  sources  was  for  the  most  part 
replacing  government  money  which  was  being  withdrawn  from  the  system.  However,  in  the 
subsequent  two  eras,  private  money  continued  to  flow  in  even  as  public  investment  increased 
significantly. One might therefore say that flows of private income were independent of flows of 
public income; they increased regardless of what was happening to public finances. The answer 
to the question “Has cost-sharing increased total funding?” is yes, with an acknowledgement that 
this was not consistently the case across the period. 

The answer to the question: “how were additional dollars spent”? seems to be: “not primarily on 
the function of undergraduate teaching”. The most obvious sign of this is that government funds 
for sponsored research were such a major portion of the new monies. But even allowing for the 
fact that new money in the periods of growth and consolidation came disproportionately outside 

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the operating grant, it was certainly possible for universities to have kept students-per-academic 
staff  ratios  lower  than  they  did.  They  could  have  spent  less  money  on  administration,  or hired 
more academic staff at lower cost. That they did not suggests that other functions were simply 
given higher priority. Undergraduates are now paying more to be a lower priority.  

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3.  HYPOTHESIS B: AS THE INCENTIVES TO EARN 

PRIVATE FUNDING INCREASE, INSTITUTIONS BECOME 
MORE RESPONSIVE TO STUDENT DEMAND 

This  chapter  looks  at  data  relevant  to  Hypothesis  B,  which  states  that  as  incentives  to  earn 
private  funding  increase,  institutions  become  more  responsive  to  user  demand.  However,  this 
expected  effect  is  conditional  on  the  attractiveness  of  these  private  revenues  and  whether 
increasing these revenues has trade-off effects for the overall behaviour or prestige of HEIs.  

Various aspects of responsiveness will be examined, including changes to provision, enrolment 
and the connection between HEIs and users. If no changes to responsiveness are visible, this is 
likely  related  to  the  incentive  structure  present  in  the  higher  education  system,  which  might 
favour other behaviours such as the maximisation of public over private funding. 

In  this  section,  we  look  at  how  institutions  have  responded  to  increases  in  private  funding. 
Generally  speaking,  Canadian  institutions  are  allowed  to  be  quite  entrepreneurial.  Apart  from 
controls  on  undergraduate  and  graduate  tuition  fees  (as  described  earlier),  there  are  few 
governmental restrictions on the actions they may take to raise money for themselves. Many, for 
instance, are active in continuing education, where fee regulation tends to be less strict. Outside 
of fee income, there are no circumstances where an attempt to increase private revenue would be 
clawed back.  

3.1  Enrolment by Discipline  

One  hypothesis  about  the  effects  of  fees  is  that  they  make  institutions  desirous  of  increasing 
revenues by focusing on programmes which are popular or lower-cost courses (these tend to be 
‘soft’  disciplines,  paper  and  pencil  subject-areas).  This  may  lead  to  overall  changes  in  the 
discipline profile of a national higher education system.  

The data from Canada do not show much in the way of evidence to confirm such a hypothesis. 
Enrolment  by  field  of  study  has  stayed  fairly  consistent  over  time,  even  as  overall  enrolments 
increased. Only the field of education has seen a significant and permanent decline in its share of 
enrolment,  and  this  is  likely  a  function  of  larger  demographic  trends  (primary-secondary 
enrolments  were  increasing  in  the  1990s  due  to  the  Baby  Boom  ‘echo’,  but  by  the  2000s,  the 
primary-secondary population was shrinking and so there was less demand for teachers). 

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Figure 3.1: Shares of enrolment by field of study, select years 

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

Other

Health

Architecture/Engineering

Match/Computer Science

Sciences

Business & management

Social Sciences

Humanities & Visual Arts

Education

1992

1997

2002

2006

2010

Source: Statistics Canada, PSIS. 

3.2  Enrolment Patterns by Mode  

As  noted  earlier  in  section  1,  part-time  enrolment  fell  substantially  in  the  1990s  before 
recovering somewhat towards the end of the 2000s. The best explanation for this phenomenon 
comes  from  O’Heron  and  Drewes  (1999),  who  noted  that  the  surge  in  part-time  students  that 
lasted into the early 1990s was largely made up of older (35+ women), many of whom were in 
occupations (e.g. nursing and teaching) that were being professionalised in the 1980s and 1990s 
and requiring incumbents to upgrade their skills by acquiring bachelor’s degrees if they had not 
already got them. Once that processed played itself out, part-time numbers fell and did not rise 
again for well over a decade. 

Generally speaking, Canadian universities do not have much incentive to enrol part-time students 
over  full-time  students.  Because  fees  are  usually  charged  on  a  per-credit  basis,  the  financial 
benefit to the institution is roughly the same. Changes in part-time student number are therefore 
mostly  a  function  of  student  demand  for  such  provision,  rather  than  a  case  of  institutions 
‘chasing dollars’ because more money can be made from them.  

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Figure 3.2: Part-time students as a percentage of total headcount (1992-2010) 

30%

25%

20%

15%

10%

5%

0%

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Part-time as a % of full-time

Source: PSIS. 

3.3  Enrolment Composition  

As noted earlier, all students at Canadian public universities are charged fees and for the most 
part, the fees students pay are roughly proportional to the number of credits they take. Fees do 
vary  among  first-entry  undergraduate  programmes  but  the  more  expensive  courses  (e.g. 
engineering) also tend to be the ones that are more costly to provide. The real ‘money-making’ 
programmes tend to be professional masters’ degrees, not first-entry programmes.19 Among first-
entry programmes, the only way institutions can make more money is to enrol a greater number 
of international students. 

International student tuition has always been set at levels between 2-3 times higher than tuition 
for  domestic  students.  Some  programme  fees  were  de-regulated  in  the  late  1990s,  though  this 
mostly  affected  graduate-level  programmes  which  we  do  not  examine  here.  Throughout  our 
period, tuition for international students rose at a rate substantially higher than inflation, roughly 
doubling from 9,000 to 18,000 dollars over our period.  

During the austerity years of our period (1992-98), international student numbers did not grow at 
all.  It  is  not  clear  why  this  should  have  been  so  as  presumably  these  were  years  in  which 
additional  revenue  would  have  been  welcomed.  However,  since  1998,  undergraduate  numbers 
have essentially tripled, and international students have now doubled their share of enrolment in 
Canadian universities from 6 to 12% even as overall enrolment has surged. 

19 As in American universities, there is some cross-subsidization between undergraduate programmes and research 
graduate programmes. This in effect happens because the former pay fees, which pays for professors’ time, which is 
very often spent with graduates rather than undergraduates. There is thus an incentive for institutions to take on 
more undergraduates in order to support more graduate students, at least up to the point where physical constraints 
mean that marginal costs exceed average ones. Cheap undergraduate programmes in the Arts and Sciences can 
therefore also be ‘money-making’ programmes, though they tend to do so because of economies of scale rather than 
because high fees are charged. 

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Figure 3.3: International undergraduate tuition in dollars and international 
enrolment as a percentage of total headcount (1992-2010) 

14%

12%

10%

8%

6%

4%

2%

0%

 $20 000
 $18 000
 $16 000
 $14 000
 $12 000
 $10 000
 $8 000
 $6 000
 $4 000
 $2 000
 $-

2
9
9
1

3
9
9
1

4
9
9
1

5
9
9
1

6
9
9
1

7
9
9
1

8
9
9
1

9
9
9
1

0
0
0
2

1
0
0
2

2
0
0
2

3
0
0
2

4
0
0
2

5
0
0
2

6
0
0
2

7
0
0
2

8
0
0
2

9
0
0
2

0
1
0
2

Intl students as % of total (left side)

Tuition (right side)

Source: Statistics Canada Tuition and Living Accommodation Costs Survey (TLAC), PSIS. 

3.4  Diversity of Provision 

It  is  difficult  to  quantify  changes  in  the  diversity  of  provision  of  higher  education  in  Canada. 
There is no centralised count of programmes offered either at the federal or the provincial level. 
Neither is there a centralised count of institutions – or, for that matter, a consistent pan-Canadian 
definition of what constitutes either a university or a college. Still, it is possible to examine the 
issue to some extent. 

The closest thing that exists to a nationally-accepted definition of a university is membership in 
the  Association  of  Universities  and  Colleges  of  Canada,  since  the  association  requires 
prospective  members  to  submit to  something  not unlike  an  accreditation  procedure  in  order  to 
join.  Between  1992  and  2010,  15  institutions  joined  the  association  while  one  institution  (the 
Technical University of Nova Scotia) left as it  was absorbed into Dalhousie University.  All of 
the  institutions  which  were  accepted  into  membership  had  formerly  been  public  community 
colleges or institutes.  

As noted earlier, Canada has no real tradition of private degree-granting universities other than a 
very small sector of religious colleges. These number only a dozen or so and for the most part 
have  very  low  enrolments.  The  largest  –  Trinity  Western  University  in  Fort  Langley,  British 
Columbia  –  has  an  enrolment  of  just  3,500.  Combined,  these  institutions  enrol  fewer  than 
15,000.  There  was  both  some  expansion  of  these  institutions  in  our  period  –  the  Mennonite 
University  in  Manitoba  was  added  in  the  1990s  –  and  some  consolidation  as  Augustana 
University College ran into financial problems and was absorbed by the University of  Alberta. 
Changes  in  enrolment  in  these  institutions  were  roughly  in  line  with  those  of  the  country  as  a 
whole.  

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Where there has been some increased diversity of provision has been in the emergence of new 
‘polytechnic’  institutions  with  in  the  public  sectors.  These  are  community  colleges  that  have 
been given the right, on a limited scale, to provide bachelor’s degrees in certain field. From the 
European  perspective  they  are  best  thought  of  as  Universities  of  Applied  Sciences  in  embryo. 
These are creatures of provincial experimentation (not all provinces have them), particularly in 
Ontario, Alberta and British Columbia. Their evolution, however, is not materially connected to 
changes in fee policies. 

In  terms  of  actual  private  college  provision  there  has  been  very  little.  A  couple  of  foreign 
providers  have  tried  to  enter  the  market  with  very  little  success  (the  American  Farleigh 
Dickinson  University  tried  to  establish  a  school  in  British  Columbia  which  later  folded;  the 
Australian Charles Sturt has had more success providing teacher training in Ontario). A couple 
of  institutions  focused  specifically  on  distance  education  tried  to  establish  themselves  in  New 
Brunswick, where regulation was slightly  laxer than elsewhere. The most notable of these  was 
Meritus  University,  a  subsidiary  of  the  American  Apollo  Group  (owners  of  the  University  of 
Phoenix), and which tried to establish itself via several major ad campaigns. It began in 2008 but 
had closed by 2011. 

There has been one notable attempt to try to create a private, secular college in Canada on the 
model of an American liberal arts college, and that is Quest University in British Columbia. It 
admitted  its  first  class  in  2007,  but  recruitment  has  proved  somewhat  slow  and  in  2010,  the 
school had fewer than 500 students. 

3.5  “Outreach” Practices  

Key informants interview indicated their belief that institutions were spending more money  on 
advertising  and  outreach,  and  cited  ‘competition’  as  the  main  reason  for  doing  so.  This  is  not 
necessarily because they want to attract more students (though this may be the case), but rather 
because they wish to compete for a better type of student. The investment is at least as much for 
purposes of prestige as it is for revenue. 

Another driver of increased expenditure on outreach and advertising is competition. It is a cliché 
among  Canada's  universities  to  talk  about  ‘increased  competition’,  but  it  is  worthwhile  being 
sceptical regarding how generalised this is. Competition – in the sense of institutions genuinely 
competing for masses of students – is fairly rare in Canada. Nova Scotia has a large number of 
schools  competing  for  a  relatively  small  population.  Southern  Ontario  has  a  large  number  of 
large  institutions  (many  of  them  quite  research-intensive)  which  compete  for  top  students  if 
nothing else. As for the rest of the country, institutions are usually operating local monopolies or 
duopolies. Very few students leave their province of origin in order to study (the proportion has 
been  steady  at  8-10%  for  decades)  and  the  circulation  is  disproportionately  between  the  three 
tightly-packed maritime provinces (Nova Scotia, New Brunswick and Prince Edward Island) and 
between British Columbia and Alberta.  

As a result, there are a large number of institutions which aren’t really competing for students in 
a  significant  sense.  The  two  universities  in  Saskatchewan  ‘compete’  for  students  from  that 

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province,  but  it’s  easy  enough  to  draw  a  line  through  the  middle  of  the  province  and  say  that 
above the line they almost all go to the University of Saskatchewan and below the line they go to 
the University of Regina; such competition as there is involves persuading the brighter students 
in their catchment areas not to head west to one of the Alberta universities. To the extent that the 
arrival  of  brighter  students  is  correlated  with  or  reflective  of  prestige,  we  see  again  here  that 
much of the domestic ‘competition’ is really about institutional prestige rather than income. 

Where outreach and competition have been more related to income is in areas with problematic 
demographics.  There  was  a  small  demographic  boom  for  the  18-21  demographic  from  about 
1997 to 2008 – what is known in Canada as the Baby Boom ‘Echo’ (i.e. the children of the post-
war  ‘Baby  Boom’  generation.  However,  this  ‘Echo’  was  not  evenly  distributed;  east  of  the 
Ontario-Quebec border, it essentially did not happen and to the west it was concentrated in the 
urban areas around Toronto, Calgary and Vancouver, in much of the rest of the country the size 
of the youth population is declining. Thus, for most of our period, Canada has effectively faced 
two  demographic  challenges:  in  certain  major  urban  areas,  the  challenge  has  been  to 
accommodate a bulge in the youth population, while in other parts of the country the challenge 
has  been  to  deal  with  stable  or  declining  populations.  In  the  latter  areas,  there  have  been  two 
coping  mechanisms.  The  first  is  to  try  to  increase  enrolments  from  the  local  population;  the 
second is to try to increase enrolments from areas outside the region. In large part, this has meant 
searching for international students. 

One type of outreach which has seen a significant change is outreach to First Nations and other 
Aboriginal peoples.20 This has increased significantly over the past two decades, and nearly all 
universities in Northern Ontario and Western Canada have staff members who are dedicated to 
outreach to Aboriginal communities and young people. Partly, this is concern for simple justice: 
Aboriginal  peoples  have  long  been  discriminated  against  in  various  ways,  gaining  access  to 
quality  education  at  all  levels  has  been  difficult  and  their  participation  rates  have  been 
substantially  lower  than  those  of  mainstream  Canadians.  But  in  part,  too,  this  is  simple  good 
business  sense.  In  Manitoba  and  Saskatchewan,  between  a  quarter  and  a  third  of  the  youth 
population  is  First  Nation  or  Métis,  and  elsewhere  in  the  region  they  make  up  an  increasing 
portion of the population. Not reaching out to these groups would likely, over the medium-term, 
lead to significantly lower enrolments. 

With respect to entrance policies, it is difficult to tell whether or not standards have changed. It is 
certainly  true  that  a  greater  proportion  of  high  school  completers  are  now  admitted  to  higher 
education; however, because there are no national matriculation exams (and no provincial ones 
either, apart from in Alberta), it is difficult to tell whether standards are increasing or decreasing. 
Universities base their entrance decisions on high school grades.  

20 A note on nomenclature: First Nations are those people who previously would have been described as ‘Indians’. 
In addition to First Nations, there are the Inuit peoples of Nunavut, the Northwest Territories, Labrador and Quebec, 
and there are the Métis, people of mixed European-Aboriginal heritage who have their own distinct heritage. Some 
First Nations peoples are sometimes described in terms of being ‘Status’ and ‘non-Status’; under the Indian Act, 
only people ‘with status’ – meaning people who can prove Indian Ancestry – are granted the rights and privileges 
due to Status Indians under the various treaties with the Crown. They are also sometimes described as being either 
‘on-reserve’ or ‘off-reserve’, which is a distinction with respect to whether they live in First Nations territory or not. 
These are overlapping identities; Status Indians are as likely to live off-reserve as on. 

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On the whole, the evidence of increasing participation rates and declining  demographics would 
lead  one  to  suspect  that  minimum  standards  may  be  trending  downwards  somewhat,  although 
this cannot be determined from statistics.  

Outreach to International Students 

Certainly, with respect to international recruitment, outreach expenditures are up enormously as 
international  students  are  an  enormously  valuable  source  of  revenue.  This  is  the  case  virtually 
across  Canadian  academia.  As  noted  earlier,  international  enrolments  at  Canadian  universities 
essentially  tripled  between  1998  and  2010.  However,  not  all  institutions  have  done  this  at  the 
same  pace.  Institutions  in  areas  of  declining  demographics  have  been  quicker  to  embrace 
international  students  since  they  are  the  only  way  they  can  keep  their  student  numbers  up. 
Institutions  in  major  urban  areas  which  still  face  enrolment  pressure  due  to  favourable  local 
demographics  have  faced  less  pressure  to  obtain  foreign  students.  Bluntly,  the  alternative  to  a 
foreign student in the former case is “nothing”. In the latter, the alternative is a domestic student. 
Even  though  international  students  can  be  charged  higher  fees,  the  difference  between  foreign 
fees (minus the cost of recruitment) on the one hand and domestic fees plus the public funding 
that goes with a domestic student on the other is relatively small. Thus, at institutions which have 
no trouble filling domestic places, one is likelier to find heavier concentrations of international 
students at the graduate level rather than the undergraduate level (i.e. students who are there to 
improve research output rather than to improve an institution’s bottom line). 

Outreach in Governance 

In terms of governance structure, very little in Canada has changed over the past twenty years. 
Institutions each have their own governing tradition. The most common governance arrangement 
is a bicameral21 one, with a Faculty-dominated body known variously as ‘Senate’ or ‘Academic 
Council’ of ‘General Faculties Council’ in charge of academic affairs and a Board of Governors 
charged with maintaining the financial health of the institution. Both Boards and Senate, by law 
and/or custom, have student representation usually constituting 10-15% of the total membership. 
Boards  by  custom  or  law  also  have  faculty  representation, but  they  always  have  a  majority  of 
their  membership  drafted  from  the  community  ‘at-large’.  Depending  on  the  province  and 
institution,  the  provincial  government  may  or  may  not  have  a  say  in  determining  at  least  a 
portion of the Board’s membership (as a rule of thumb, the older the university, the less likely 
the  government  has  any  say  over  Board  membership).  Community  Board  members  are  not 
always  from  the  business  community,  but Boards  tend to  prefer  to  appoint  people  who  can be 
‘champions’  for  the  institution,  especially  with  respect  to  fund-raising,  so  businessmen  and 
women are usually fairly prominent on Boards. However, apart from their role in appointing the 
institution’s President (equivalent to a Vice-Chancellor or Rector), Boards are forbidden to deal 
with  internal  academic  matters,  so  this  prominence  does  not  really  have  much  effect  on 
educational offerings. 

21 The second-most common governance arrangement is a tri-cameral one, in which the community-relations and 
public-facing aspects of the Board are hived-off into a separate organization named ‘University Council’ or 
(confusingly) ‘Senate’ (in those instances, the academic senate has another name like ‘General Faculty Council’). 
One institution – the University of Toronto – has a unicameral system, in which a single body of roughly 50 people 
deals with both academic and business affairs. 

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No institution of which we are aware has had a fundamental change in governing structure in that 
period.  Even  among  new  institutions  –  ones  which  have  shifted  to  university  status  from  a 
previous  college  status  –  the  tendency  has  been  not  to  create  any  radical  new  departures  in 
governance, but to adapt as quickly as possible to existing norms. 

3.6  Quality and Relevance  

Another  posited  development  related  to  fees  is  that  institutions  will  be  of  higher  quality  and 
relevance  to  students  because  the  consequence  of  dissatisfaction  (losing  potential  clients)  is 
greater.  

One  way  in  which  changes  in quality  and  relevance  of  higher  education can  be  assessed is  by 
using satisfaction measures from students, graduates and employers. In Canada, graduate surveys 
are numerous, but tend to be run by provincial governments for accountability purposes and have 
different kinds of questions, making a national examination impossible. Ontario has a survey of 
graduate employers, but only for graduates of college programmes. There is a national survey of 
graduates, but it  tends to  be  focused on  issues  relating to post-graduate  activities,  employment 
and income. However, the Canadian Undergraduate Survey Consortium does perform a triennial 
survey of students which asks a question about overall satisfaction with education received, and 
the data go back to 1999. The response to that question, as Figure 3.4 shows, has always resulted 
in 85-90% saying they were satisfied. However, in the late 2000s, there was a major jump in the 
proportion saying they were ‘very satisfied’. It is unclear what caused this shift. 

Figure 3.4: Satisfaction with overall quality of undergraduate education, in 
Percent 

100

90

80

70

60

50

40

30

20

10

0

67 

23 

1999

68 

65 

19 

2002

21 

2005

Very Satisfied

Satisfied

50 

35 

57 

33 

2008

2011

Source: Canadian Undergraduate Survey Consortium. 

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3.7  Evaluation  

The broad hypotheses that we tested in this section was “have institutional strategies changed to 
maximise  revenue  from  private  sources”.  We  did  this by  looking at  six  sub-hypotheses,  which 
we will briefly review here before attempting to assess whether there was an overall effect. 

The  first  sub-hypothesis  relates  to  whether  the discipline profile  of  HEIs  in  a country  changed 
(e.g., increasing offers in paper-and-pencil subjects and fewer provisions in expensive lab-based 
areas, or focus on more popular subjects) in response to a change in cross-sharing policies. The 
evidence here appears to be “no”. In fact, despite a considerable increase in fees, there have been 
no notable shifts in enrolment from one field of study to another. 

The second sub-hypothesis relates to whether there has been any change in modes of study, such 
as  an  increase  in  part-time  provision,  with  the  aim  of  increasing  private  revenue.  However, 
because of the way tuition is normally assessed in Canada, this question does not arise the way it 
does in other countries in this study. In any case, the trend in part-time studies was downward or 
stable for most of the period in question, though there has of late been something of a surge in 
these enrolments. 

The  third  sub-hypothesis  has  to  do  with  institutions  changing  in  enrolment  composition  to 
maximise  revenue,  such  as  by  recruiting  more  international  (non-domestic)  students  paying 
international  student  fees.  Here,  fairly  clearly,  the  answer  is  yes;  in  some  ways,  the  surprise  is 
why  the  large  increase  in  enrolment  didn’t  happen  sooner  (the  rise  in  international  enrolments 
didn’t occur until after the worst of the funding crunch of the mid/late 90s was over). We have 
noted, however, that for some institutions, increasing demand for international students has been 
a function of demographic change as much as simple policy incentives. 

The fourth sub-hypothesis was related to any change that had occurred in the degree of diversity 
in higher education providers, such as more private institutions, or more programmes offered by 
public  institutions.  This  is  a  difficult  question  to  address  in  the  Canadian  context  because  the 
ability of private institutions to operate is highly restricted by legislation and regulation. Most of 
the increase in diversity in provision came from within the public sector as colleges evolved in 
various ways. They  were  responding to market needs in many ways, but they  were still public 
sector actors. Some very limited private sector activity did occur, notably in New Brunswick and 
at Quest University, but it had little noticeable impact on the sector overall.  

The  fifth  sub-hypothesis  had  to  do  with  institutions  becoming  more  open-access  and  market-
focused in order to increase income. Informants agreed that considerably more money was being 
spent  on  marketing,  though  in  some  cases  the  search  for  dollars  in  the  short-term  was  less 
important  than  the  search  for  prestige  in  the  long-term.  This  is  not  necessarily  just  a  case  of 
chasing  tuition dollars,  though,  since  in  many  provinces  public dollars  also  follow  enrolments. 
There  is  no  real  evidence  of  institutions  engaging  in  outreach  to  the  business  community  via 
changes  in  governance  structure.  And  while  there  is  no  evidence  of  institutions  deliberately 
lowering entrance standards, the vast influx of new students since about 1998 makes it unlikely 
that the median student is as prepared for university as they were in the early 1990s. 

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The  sixth  and  final  sub-hypothesis  has  to  do  with  quality  and  relevance.  Did  students  and 
graduates  become  more  satisfied  with  the  options  available  to  them?  Did  graduates  become 
satisfied with their employment outcomes? And were employers satisfied with quality of recent 
graduates? The answer to this question must de tentative because of such a lack of evidence. We 
have no data whatsoever on employers and the data on graduates are not usable in this context 
because of inter-provincial differences. Among students, 85-90% consistently report that they are 
satisfied  with  the  overall  quality  of  their  education,  but  there  has  been  a  recent  spike  in  the 
proportion saying they are very satisfied.  

And  so,  to  the  summative  question:  have  institutional  strategies  changed  to  maximise  revenue 
from private sources? The answer to this is yes, but it is an incomplete answer. The fact is that 
many of the public sources of money have depended on increased enrolment as well. The likelier 
interpretation of the data is simply that institutions have become adept at maximizing  all forms 
of revenue, not merely private revenue. To the extent this has been occurring at the student level, 
most of the most notable changes have come through increasing revenue by increasing enrolment 
of  international  students;  and  to  a  lesser  extent,  Aboriginal  enrolments.  Much  of  what  is  seen 
from the outside as ‘competitive’ behaviour is in fact competition for institutional prestige rather 
than dollars (though over the longer term prestige and income are presumably correlated). And 
the change in outreach activities did not extend to the issue of governance; here, community and 
business  leaders  have  always  had  a  major  say  in  the  governance  of  institutions,  though  this 
influence tends not to be felt at the level of academic programming. 

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4.  HYPOTHESIS C: INCREASING PRIVATE FUNDING HAS 

A NEGATIVE EFFECT ON PARTICIPATION 

This  chapter  looks  at  data  relevant  to  Hypothesis  C,  which  states  that  as  private  funding 
increases,  costs  increase  to  students  and  their  families,  which  in  turn  may  have  an  impact  on 
quantitative student demand and on the composition of the student body.  

In order to assess this, it is important to look at:  

 

the real costs to students, including direct and indirect support provided by the state, which 
may discount the gross costs 

  how tuition fees are organised: Who pays and who does not pay? When do you  pay – as a 

 

student or as a ‘successful’ graduate (with a well-earning job)? 
the  overall  trend  of  participation  rates  in  the  country  in  question,  i.e.  expanding,  stable  or 
contracting? 

4.1  Students’ Costs for Higher Education  

This section focuses on the impact an increase in private costs has on students. It will begin with 
a recap of the key policy changes with respect to student fees and describe trends over time with 
respect to student fees and other costs. The discussion will then move to the types of assistance 
available to students and the resulting net costs to students for their education. 

Student Expenditures 

Students in Canada pay both tuition fees, which are meant to cover (at least in part) instructional 
costs, and what are known as ‘ancillary fees’, which include dedicated funds for student services, 
student union dues, special facilities fees and the like. Since both sets of fees are mandatory, we 
report both of them together in the charts that follow. This produces a figure which is higher than 
what  is  usually  claimed  for  Canadian  tuition  (ancillary  fees  have  averaged  around  500-700 
dollars for the past few years, or equal to between 10 and 15% of tuition), but the resulting figure 
is a more accurate portrayal of student costs. . 

As Figure 4.1 shows, during the period of austerity, tuition fees rose by an average of about 7% 
per  year  in  real  terms.  However,  after  the  year  2000,  the  pace  of  tuition  fee  increases  slowed 
considerably, to just 2% per year. This was the result of a series of quite deliberate policy moves 
that  occurred  in  different  provinces  once  the  challenge  of  the  austerity  years  had  passed.  The 
Ontario  government,  which  had  permitted  annual  tuition  increases  of  20%  in  the  late  90s, 
suddenly  limited  increases  to  2%  per  year  above  inflation.  Manitoba  froze  tuition  fees. 
Newfoundland rolled fees back 5% per year for four years and then froze them. British Columbia 

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was the only province to make decisive moves in the other direction: in 2001, with a change in 
government, fees, which has been frozen for most of the 1990s under the previous government, 
were allowed to rise by 55% over two  years before bringing them back into line with national 
practices  and  allowing  increases  more  in  line  with  inflation.  In  a  more  limited  way,  the  same 
thing  happened  in  Quebec,  with  a  new  government  allowing  modest  fee  increases  after  it 
replaced a pro-freeze government in 2003. Across the country, mandatory tuition and fees rose 
by 82% in constant dollars over the period in question. 

Figure 4.1: Average annual tuition and mandatory fees (1993-2010) , in dollars 

7 000

6 000

5 000

4 000

3 000

2 000

1 000

0

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Note: In Canadian dollars. Constant prices (2012). 
Source: TLAC. 

Of  course,  tuition  fees  are  not  the  only  cost  facing  students.  In  addition  to  these  costs  are 
expenses such as books, housing, food, etc. In Canada there is no ‘official’ source for such data. 
In  2001-2  and  2003-4,  the  Canada  Millennium  Scholarship  commissioned  a  market  research 
company  (Ekos  research)  to  perform  a  survey.  In  the  period  2010-2012,  Higher  Education 
Strategy Associates asked a less detailed set of annual questions which permit some estimation 
of the same costs. The results are shown in Table 4.1. 

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Table 4.1: Total student costs, in dollars (2001-2012)  

Student fees 

Books, etc. 

Housing 

Food  

Travel 

Other 

2001 

4,941 

n/a 

1,919 

2003 

5,338 

401 

2,331 

6,394 

4,744 

2010 

2012 

5,941 

951 

3,276 

1,454 

760 

3,170 

6,350 

1,211 

3,317 

1,262 

667 

2,468 

Total 
Note: In Canadian dollars. Constant prices (2012). 
Source: TLAC, EKOS Student Income/Expenditure Surveys (2001, 2003), HESA CanEd Student panel (2010-2012). 

13,255 

12,814 

15,551 

15,275 

The data in table 4.1 shows relative stability. Over a decade, most of the increase in total student 
costs comes from changes in the fees. The only other change has been in housing; and this is as 
much  due  to  an  increasing  percentage  of  students  surveyed  living  away  from  home  as  it  is  an 
increasing in the actual housing cost. 

Student Assistance in Canada 

Canadian study aid is relatively simple in theory but is greatly  complicated by the fact that the 
federal  and  provincial  governments  have  overlapping  jurisdiction and that  provincial  study  aid 
strategies differ significantly from one another. In this section we will briefly describe both the 
country’s  system  of  need-based  assistance  and  its  relatively  unique  system  of  non-need-based 
assistance as well. 

Need-Based Aid 

Canadian governments collectively provide their students with roughly 4 billion dollars per year 
in loans and grants, nearly all of which is distributed on the basis of need, where need is defined 
as ‘assessed costs’ minus ‘assessed resources’ (as distinct from a system which is simply based 
on  individual  or  family  income).  In  nine  provinces  and  Yukon  Territory,  the  federal  Canada 
Student  Loans  Programme  (CSLP)  operates  in  a  more-or-less  integrated  fashion  with  a 
provincial student assistance programme; two separate systems provide the student with money, 
but they mostly work on the same system of need assessment and the student need only fill out a 
single form in order to obtain aid. Quebec and the Northwest Territories have ‘opted out’ of the 
federal system, and offer their own unique integrated programmes while receiving direct federal 
compensation. 

The  amount  of  aid  available  to  students  can  vary  significantly  from  province  to  province  and 
depending  on  one’s  student  status.  The  amount  students  receive  is  based  on  ‘assessed  need’, 
which is equal to ‘assessed costs’ minus ‘assessed resources’. Assessed costs include tuition, a 
set  of  living  expenses  adjusted  to  the  costs  of  living  in  each  province  and  dependent  upon 
whether the student lives with his/her parents or not, and –if applicable – the costs of supporting 

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dependent  travel.  The  definition  of  assessed  resources  changes  slightly  depending  on  the 
student’s  situation.  For  students  who  are  considered  ‘independent’  (which  in  most  provinces 
means  being  more  than  four  years  out  from  secondary  school  or  having  two  years  continuous 
experience  in  the  labour  market),  it  is  a  simple  assessment  of  the  student’s  own  income  and 
assets.   If they are married, their deemed contribution will also be a function of their spouse’s 
income.  If they are considered dependent, parental income is also assessed. An aid package will 
be equal to assessed need up to a maximum which may  vary according to student category but 
which is normally 350 dollars per  week of study (roughly 12,000 dollars per  year), but can be 
higher  if  the  student  has  children.  The  loan/grant  mix  within  that  aid  package  can  vary 
significantly between provinces depending on the generosity and ability of the local government 
to pay.  

In  every  province,  students  have  access  both  to  loans,  which are  interest-free  during  the  study 
period and must be repaid (typically beginning six months after the end of the study period and 
lasting for 10-15 years), and some form of non-repayable aid. This aid, made up of grants or loan 
remission payments, works in one of three basic ways: 1) ‘Upfront’ grants, which are disbursed 
before  loans  and  any  remaining  financial  need  is  met  with  loans  up  to  the  aid  maximum;  2) 
Certain  provincial  grant  programmes  (e.g.,  the  New  Brunswick  Bursaries)  provide  additional 
support over and above student loan maximums to students with ‘unmet need’ (i.e. need levels 
above  the  350  dollars/week  maximums;  and  3)  Loan  remission  (e.g.,  the  Ontario  Student 
Opportunities Grants) which consist of payments made at the end of a successful academic year 
to reduce the amount a student has already borrowed.  

Figure 4.2 shows the evolution of grants in Canada over time.22 The number of grants issued23 
increased  enormously  between  1999  and  2010.  There  were  a  number  of  reasons  for  this:  the 
introduction  of  a  federal  programme  called  the  Canada  Millennium  Scholarship  Programme 
(which  despite  its  name  was  mostly  involved  in  the  delivery  of  need-based  aid)  was  one; 
increased  provincial  investment  in  study  aid  was  another.  It  was  also  around this time  that  the 
value of the average grant fell precipitously, from around 7,000 to 3,500 dollars. This was partly 
due to the fact that nearly all the new grants were under 3,000 dollars in value, but it was also 
due to a shift in the way provinces delivered their loan remission programmes; prior to 1998 or 
so, they  were usually delivered at the end of a degree rather than the end of a  year and so the 
individual amounts were correspondingly larger. 

22 Note that these figures include recipients from both universities and colleges. 
23 What are reported here are ‘grants’ rather than ‘grant recipients.’ It is possible in many provinces to receive more 
than one grant and there is no way given existing data sources to obtain an unduplicated count of recipients. A best 
guess for an unduplicated count of recipients would likely be around 350,000. 

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Figure 4.2: Number and average size of grants (1993-2010), in dollars 

 600 000

 500 000

 400 000

 300 000

 200 000

 100 000

 -

 8 000

 7 000

 6 000

 5 000

 4 000

 3 000

 2 000

 1 000

 -

1993-94 1995-96 1997-98 1999-00 2001-02 2003-04 2005-06 2007-08 2009-10

Grant recipients (left-side)

Avg grant (right-side)

Note: In Canadian dollars. Constant prices (2012). 
Source: State of Study aid Database. 

Figure 4.3 shows the evolution of loans to university and college students over time. This graph 
is somewhat more straightforward than the previous one. The number of loans issued increased 
significantly during the recession of the mid-90s, then fell off again in the late 90s as improved 
economic conditions and the effects of new regulations making it more difficult for students at 
private career colleges to obtain aid took effect.  Loan recipient numbers spiked again with the 
onset of the most recent recession. 

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Figure 4.3: Total number of loans and average loans (1993-2009), in dollars 

 560 000

 540 000

 520 000

 500 000

 480 000

 460 000

 440 000

 420 000

 400 000

 $7 000

 $6 000

 $5 000

 $4 000

 $3 000

 $2 000

 $1 000

 $-

19931994199519961997199819992000200120022003200420052006200720082009

Loans issued (left side)

Average net loan (right side)

Note: Net loan is loan minus loan remission. In Canadian Dollars. Constant prices (2012). 
Source: State of Study aid Database. 

Figure 4.4 shows the balance of aid between loans and grants over time. The 1999 shift towards 
more  grants  shown  in  Figure  4.2  clearly  altered  the  balance  of  loans  and  grants  within  the 
Canadian system. Prior to 1999, no more than 20% of aid was ever grant-based; after it, it has 
never been lower than 25% and recently it seems to have stabilised at between 30 and 35%. 

Figure 4.4: Percentage of need-based study aid that is non-repayable (1993- 
2010) 

35% 

30% 

30% 

27%  28% 

30% 

29% 

25% 

35%  35%  34% 

33% 

19%  20% 

16%  14%  15%  16% 

40%

35%

30%

25%

20%

15%

10%

5%

0%

1993-94 1995-96 1997-98 1999-00 2001-02 2003-04 2005-06 2007-08 2009-10

Source: State of Study aid Database. 

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Of course, as noted above, the loan/grant mix does vary significantly by province. As Figure 4.5 
shows, the degree to which aid is repayable can vary widely from one province to another. For 
2010-11,  in  New  Brunswick  and  Nova  Scotia,  the  percentage  is  a  mere  20%;  in  Quebec,  it  is 
48%. 

Figure 4.5: Percent of non-repayable aid (2010-11) 

48% 

34% 

37% 

35% 

36% 

27% 

21% 

23% 

20% 

20% 

60%

50%

40%

30%

20%

10%

0%

BC

AB

SK

MB

ON

QC

NB

NS

NL

PE

Note: BC = British Columbia; AB = Alberta; SK = Saskatchewan; MB = Manitoba; ON = Ontario; QC = Quebec; NB = 
New Brunswick; NS = Nova Scotia; NL = Newfoundland and Labrador; PE = Prince Edward Island. 
Source: State of Study aid Database. 

Non-Need-Based Aid 

In  addition  to  need-based  aid,  there  are  a  number  of  other  sources  of  government  aid  that  are 
available to all. There is first of all, an extensive series of merit scholarships available, most of 
which  are  available  to  graduate  students.  Second,  there  are  a  series  of  savings-related 
instruments, the most important of which are Canada Education Savings Grants (CESG), which 
provides  a  payment  that  matches  20%  of  a  family’s  contribution  to  a  Registered  Education 
Savings  Plan  up  to  400  dollars  per  year  (additional  top-up  grants  for  middle-  and  low-income 
families  are  available).  The  RESP  programme  also  acts  as  a  kind  of  a  tax  shelter,  as  interest 
earned on the savings are not taxed until withdrawals are made, they are taxed in the name of the 
student  (who  will  typically  have  low  earnings  and  therefore  owe  little  or  no  tax).  The  federal 
government’s  Canada  Learning  Bond  acts  like  a  CESG  worth  500  dollars  for  low-income 
families, except it does not require families to make a contribution to a RESP. Payments under 
both the CESG and the CLB are provided to pre-17-year-old youth, i.e., prior to the study period. 
As a result, we do not include monies spent on these programmes in our look at affordability; it 
should simply be borne in mind that these programmes collectively cost government more than a 
billion dollars a year – almost as much as need-based grants. 

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The largest form of non-need based aid, worth well over 2 billion dollars per year, are various 
forms  of  tax  assistance.  Virtually  all  tax  assistance  in  Canada  comes  in  the  form  of  non-
refundable  tax-credits  which  may  be  transferred  or  carried  forward  from  year  to  year.  A  tax 
credit differs from a deduction in that its value is the same for all tax-filers – it increases one’s 
threshold exemption for tax, rather than reducing taxable income (the latter being significantly 
more valuable to wealthier tax-filers than to poorer ones). They are non-refundable in that they 
cannot be used to reduce tax burden below zero and create a refund; however, if one’s taxable 
income in a given year is too low to use the value of a credit, it either be carried forward for use 
in a future year or transferred to a parent or spouse. 

In Canada, there are two main types of tax credits. The first is with respect to tuition: students 
receive a credit for all their tuition and ancillary fees (student union fees excepted). The second 
is a time-based credit which provides a certain amount of credit per month of study. This amount 
varies by mode of study: the amount is 465 dollars/month for full-time students and $140/month 
for part-time students. Different provinces, which each have their own tax-system, offer a variety 
of  similar  time-based  tax  credits,  ranging  from  200  to  500  dollars  per  month  for  full-time 
students. The value of these credits is equal to the amount of the credit times the lowest marginal 
tax  rate  in  each  jurisdiction:  these  range  from  21  to  36%  across  the  country:  for  full-time 
university  students,  the  effective  value  of  the  tax  relief  is  roughly  2,000  dollars.  Credits  are 
issued  directly  to  students  who  can  claim  them  themselves  in  the  current  tax  year,  carry  them 
forward to a future tax year, or pass them on to a parent or spouse.  

Governments do not ‘spend’ on tax assistance; rather, the cost of these measures is calculated in 
terms  of  income  foregone  by  government.  The  technical  term  for  this  money  not  collected  by 
government is ‘tax expenditure.’ The total amount spent each year by both levels of government 
is just under 2.4 billion and the average value of this tax relief, across all students (university and 
college, full-time and part-time) is around 1,300 dollars. The big increase in the value of these 
credits  came  in  the  period  from  1996  to  2001.  In  this  very  short  period,  the  federal  monthly 
credit for full-time students increased in value from 60 to 400 dollars a month, the credit for part-
time students was introduced and ancillary fees were included in the tuition fee credit. 

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Figure 4.6: Tax expenditures (1993-2009), in dollars 

 2 000 000

 1 800 000

 1 600 000

 1 400 000

 1 200 000

 1 000 000

 800 000

 600 000

 400 000

 200 000

 -

 $1 600

 $1 400

 $1 200

 $1 000

 $800

 $600

 $400

 $200

 $-

19931994199519961997199819992000200120022003200420052006200720082009

Students (left-side)

Tax expenditure/student (right side)

Note: In Canadian dollars. Constant prices (2012). 
Source: State of Study aid Database. 

Net Costs to Students 

As should be evident from the descriptions of various study aid programmes above, the rise in 
tuition fees over the past two decades has to some considerable degree been offset by increases 
in  various  sources  of  subsidies.  Figure  4.7  shows  that  while  average  tuition  and  fees  have 
increased  by  2,622  dollars  in  real  dollars  since  1993,  the  net  amount  actually  payable  (i.e. 
average tuition minus average grants and tax expenditures) has increased by just 580 dollars, and 
that  the  figure  is  essentially  unchanged  since  1999.  A  similar  story  exists  for  the  amount 
students,  on  average,  pay  out  of  their  own  pockets  in  the  short-term  (that  is,  taking  loans  into 
account as well): this is up only 645 dollars since 1993, and most of that change happened in the 
mid-to-late 1990s.  

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Figure 4.7: Various net costs, in dollars (1993-2009) 

 7 000

 6 000

 5 000

 4 000

 3 000

 2 000

 1 000

 -

 (1 000)

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Fees

Net fees

Net fees minus TE

Net fees minus TE and loan

Note:  Net student  fees  = student  fees minus  grants,  TE  – tax expenditures.  In Canadian  dollars.  Constant  prices 
(2011). 
Source: State of Study aid Database 

Figures  4.8  through  4.11  portray  the  same  data  from  the  point  of  view  of  each  of  the  four 
provinces we have selected for closer examination. In both Quebec and Newfoundland, average 
net  tuition  fees  after  grants  and  tax  credits  are  considered  essentially  zero  currently.  Quebec’s 
fees  have  been  largely  unchanged  for  the  full  two-decade  period  (though  net  fees  after  tax 
expenditures  did  drop  significantly  as  a  result  of  federal  policy  innovations)  while  in 
Newfoundland  there  has  been  a  precipitous  fall  in  cost.  In  Ontario,  net  fees  of  all  type  have 
essentially  been  flat  since  2000;  in  British  Columbia,  the  large  hike  in  tuition  of  2001-03  has 
similarly been followed by an era of flat net fees.  

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Figure 4.8: Various net Costs, Quebec (1993-2009) 

4 000

3 000

2 000

1 000

0

-1 000

-2 000

Fees

Net Fees

Net Fees after TE

Net Fees after TE and Loans

Note: In Canadian dollars. Constant prices (2011). 
Source: State of Study aid Database 

Figure 4.9: Various net costs, Newfoundland (1993-2009)24 

6 000

5 000

4 000

3 000

2 000

1 000

0

Fees

Net Fees

Net Fees after TE

Note: Canadian dollars. Constant prices (2011). 
Source: State of Study aid Database 

24 Data on loans for university students are not reliable for Newfoundland prior to about 2002. Therefore Net Fees 
after TE and Loans is not portrayed in this graph. 

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Figure 4.10: Various net costs, Ontario (1993-2009) 

8 000

6 000

4 000

2 000

0

-2 000

-4 000

Fees

Net Fees

Net Fees after TE

Net Fees after TE and Loans

Note: Canadian dollars. Constant prices (2011). 
Source: State of Study aid Database 

Figure 4.11: Various net costs, British Columbia (1993-2009) 

8 000

6 000

4 000

2 000

0

-2 000

-4 000

Fees

Net Fees

Net Fees after TE

Net Fees after TE and Loans

Note: Canadian dollars. Constant prices (2011). 
Source: State of Study aid Database 

Student Debt 

One  further  measure  of  affordability  that  is  sometimes  used  is  that  of  student  debt.  Average 
student debt in Canada is somewhat difficult to calculate because loans (even the federal ones) 
are administered provincially, and not all provinces publish statistics on debt. As a result, the two 

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most  common  methods  of  calculating  debt  are  based  on  student  estimates  of  their  own  debt, 
rather  than  administrative  sources.  The  first  source  is  the  National  Graduate  Survey,  which  is 
conducted  every  5-6  years  by  Statistics  Canada  and  involves  interviews  with  50,000  or  so 
graduates 24 months after the end of their studies. The second is a triennial survey of students in 
their final year of study. The former is thought to be significantly more accurate than the latter, 
but given survey design and processing time it takes almost 48 months for results to come out 
whereas with the latter the lag is about 6 months. 

Figure 4.12: Average student debt (1982-2012) 

24 707 

24 549 

25 276 

22 541 

26 680 

24 579 

30 000

25 000

20 000

15 000

10 000

5 000

0

16 795 

11 917 

12 543 

7 434 

1982

1986

1990

1995

2000

2003

2005

2006

2009

2012

Note: Canadian dollars. Constant prices (2011). 
Source:  1982,  1986,  1990,  1995,  2000,  2005  –  National  Graduates  Survey.  2003,  2006,  2009  –  Canadian 
Undergraduate Survey Consortium  

What Figure 4.12 shows is more or less a reflection of what we have already seen with respect to 
study aid. As loan aid ballooned in the mid-1990s, so too did average debt, which more or less 
doubled in the 90s. However, since then, the rise of various forms of aid (both need-based and 
non-need based) has stabilised debt levels, which are now essentially exactly where they were in 
2000. The fact that the large rises in participation happened after the large increase in debt may 
suggest that debt is not exactly a deterrent in terms of participation. 

Return on Investment 

A  final  issue  is  how  changing  net  costs  have  affected  Return  on  Investment  over  time.  Figure 
4.13  shows  the  relative  earnings  of  Tertiary  graduates  relative  to  secondary  school  graduates. 
Canada has long been known as one of the countries with lower levels of returns on investment; 
however, the level of return has remained very stable over time, meaning that changes in returns 
are unlikely to have been a major factor in changing enrolment levels. 

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Figure 4.13: Relative earnings of higher education graduates (1997-2010) 

200

180

160

140

120

100

80

60

40

20

0

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Note: Data indexed to earnings of people with secondary and post-secondary, non-tertiary education =100. 
Source: OECD Education at a Glance. Data for 2001 are missing.  

4.2  Participation Rates  

A  key  question  to  address  in  our  research  is  whether  the  changes  in  cost-sharing  have  had  an 
impact  on  overall  participation  rates.  This  will  necessarily  be  a  correlational  examination 
because we do not have access to micro-data that would allow us to look at individual reactions 
to individual prices.  

Figure  4.14  shows  that  participation  rates  stayed  more  or  less  flat  as  nominal  tuition  rose  and 
began to rise rapidly once the rate of increase in nominal tuition started to even out. There seems 
to be less of a relationship between participation and net tuition minus tax expenditures (either 
with or without loans) – these were relatively steady throughout the period and so have little to 
offer in the way of explaining a major increase in participation.  

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Figure 4.14: Participation vs. various cost indices, in dollars (1993-2009) 

 7 000

 6 000

 5 000

 4 000

 3 000

 2 000

 1 000

 -

 (1 000)

3
9
9
1

4
9
9
1

5
9
9
1

9
9
9
1

0
0
0
2

1
0
0
2

2
0
0
2

3
0
0
2

8
9
9
1

7
9
9
1

6
9
9
1
Fees
Net fees minus TE
Participation rate

40%

35%

30%

25%

20%

15%

10%

5%

0%

9
0
0
2

6
0
0
2

7
0
0
2

4
5
0
0
0
0
2
2
Net fees
Net fees minus TE and loan

8
0
0
2

Note: In Canadian dollars. Constant prices (2011). 
Source: State of Study aid Database, PSIS, Statistics Canada post-censal estimates. 

Figure 4.14 could be interpreted as saying that a return of stability in nominal tuition fees drove 
the increase in participation. This is not, however, the common interpretation in Canada. Recall 
from  earlier  sections  the  periods  from  1998  onwards  was  not  just  the  period  when  tuition 
increases  started  to  moderate  –  it  was  also  the  period  when  operating  budgets  began  to  rise 
sharply. One could therefore  equally  posit that the increase in operating grants  – which in turn 
permitted  the  hiring  of  new  professors,  acquisition  of  new  space  capable  of  sustaining  higher 
enrolment – was what increased participation.  

The other piece of evidence suggesting that it was not nominal tuition that was the prime factor 
at work is that the results by province tell a slightly different story, as is shown by Figures 4.15 
through 4.18.  Here  we  see  a  significantly  less  coherent  set  of  stories.  In  British  Columbia, the 
participation rate moves steadily upward throughout our period regardless of what is happening 
to costs. In Newfoundland, participation rates rise along with tuition in the 90s, continue rising in 
the early 2000s as fees fell, and then hit a plateau of 29% as tuition was frozen (but fell in real 
terms). Participation patterns for Ontario and Quebec are similar  – stable in the 1990s followed 
by a jump in the 2000s – though the two provinces’ fee experiences were quite different. 

Put simply, what Figures 4.15 through 4.18 tend to show is that all provinces followed relatively 
similar paths in terms of participation, even though their experiences in terms of both absolute 
amounts of fees charged and changes in fees charged were quite different. 

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Figure 4.15: Participation vs. various cost indices, British Columbia (1993-2011) 

 $8 000

 $6 000

 $4 000

 $2 000

 $-

-$2 000

-$4 000

30%

25%

20%

15%

10%

5%

0%

4
9
-
3
9
9
1

5
9
-
4
9
9
1

6
9
-
5
9
9
1

7
9
-
6
9
9
1

8
9
-
7
9
9
1

9
9
-
8
9
9
1

0
0
-
9
9
9
1

1
0
-
0
0
0
2

2
0
-
1
0
0
2

3
0
-
2
0
0
2

4
0
-
3
0
0
2

5
0
-
4
0
0
2

6
0
-
5
0
0
2

7
0
-
6
0
0
2

8
0
-
7
0
0
2

9
0
-
8
0
0
2

0
1
-
9
0
0
2

1
1
-
0
1
0
2

Fees
Net Fees after TE
Participation rate

Net Fees
Net Fees after TE and Loans

Note: In Canadian dollars. Constant prices (2011). 
Source: State of Study aid Database, PSIS, Statistics Canada post-censal estimates 

Figure 4.16: Participation vs. various cost indices, Newfoundland (1993-2011) 

35%

30%

25%

20%

15%

10%

5%

0%

7 000

6 000

5 000

4 000

3 000

2 000

1 000

0

4
9
-
3
9
9
1

5
9
-
4
9
9
1

6
9
-
5
9
9
1

7
9
-
6
9
9
1

8
9
-
7
9
9
1

9
9
-
8
9
9
1

0
0
-
9
9
9
1

1
0
-
0
0
0
2

2
0
-
1
0
0
2

3
0
-
2
0
0
2

4
0
-
3
0
0
2

5
0
-
4
0
0
2

6
0
-
5
0
0
2

7
0
-
6
0
0
2

8
0
-
7
0
0
2

9
0
-
8
0
0
2

0
1
-
9
0
0
2

1
1
-
0
1
0
2

Fees

Net Fees

Net Fees after TE

Participation Rate

Note: In Canadian dollars. Constant prices (2011). 
Source: State of Study aid Database, PSIS, Statistics Canada post-censal estimates. 

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Figure 4.17: Participation vs. various cost indices, Ontario (1993-2011) 

8 000

6 000

4 000

2 000

0

-2 000

-4 000

4
9
-
3
9
9
1

5
9
-
4
9
9
1

6
9
-
5
9
9
1

7
9
-
6
9
9
1

8
9
-
7
9
9
1

9
9
-
8
9
9
1

0
0
-
9
9
9
1

1
0
-
0
0
0
2

2
0
-
1
0
0
2

3
0
-
2
0
0
2

4
0
-
3
0
0
2

5
0
-
4
0
0
2

6
0
-
5
0
0
2

7
0
-
6
0
0
2

8
0
-
7
0
0
2

9
0
-
8
0
0
2

0
1
-
9
0
0
2

1
1
-
0
1
0
2

Fees
Net Fees after TE
Participation Rate

Net Fees
Net Fees after TE and Loans

Note: In Canadian dollars. Constant prices (2011). 
Source: State of Study aid Database, PSIS, Statistics Canada post-censal estimates. 

Figure 4.18: Participation vs. various cost indices, Quebec (1993-2011) 

4 000

3 000

2 000

1 000

0

-1 000

-2 000

40%
35%
30%
25%
20%
15%
10%
5%
0%

30%

25%

20%

15%

10%

5%

0%

4
9
-
3
9
9
1

5
9
-
4
9
9
1

6
9
-
5
9
9
1

7
9
-
6
9
9
1

8
9
-
7
9
9
1

9
9
-
8
9
9
1

0
0
-
9
9
9
1

1
0
-
0
0
0
2

2
0
-
1
0
0
2

3
0
-
2
0
0
2

4
0
-
3
0
0
2

5
0
-
4
0
0
2

6
0
-
5
0
0
2

7
0
-
6
0
0
2

8
0
-
7
0
0
2

9
0
-
8
0
0
2

0
1
-
9
0
0
2

1
1
-
0
1
0
2

Fees
Net Fees after TE
Participation Rate

Net Fees
Net Fees after TE and Loans

Note: In Canadian dollars. Constant prices (2011). 
Source: State of Study aid Database, PSIS, Statistics Canada post-censal estimates. 

It is worth examining what some of the literature says at this point. Johnson and Rahman (2005) 
and Johnson (2008) both used provincial-level tuition fee data to look at changes in enrolment. 
The  latter,  which  used  both  changes  in  tuition  and  ‘tuition  minus  tax  expenditures’  as 
independent variables, found no relationship with either access rates or persistence rates on the 
students  covered  by  the  longitudinal  Youth  in  Transition  Survey.  The  2005  piece  did  seem  to 

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show  that  higher  tuition  fees  in  the  1990s did  cause  a  reduction  in  enrolment  relative to  long-
term enrolment trends, but it did not control for government grants to institutions (which, as we 
have  seen,  may  be  a  major  confounding  variable  since  tuition  increases  were  often  correlated 
with decreases in public funding during that period). 

4.3  Composition of the Student Body  

In this section we will look at available data on the composition of the student body over time to 
see if any changes have occurred that might be linked to changes in cost-sharing. 

Gender 

In 1981, total female enrolments surpassed male enrolments for the first time and since then the 
gap has steadily widened. As Figure 4.19 shows, this is due mainly to a very  strong and steady 
increase  in  full-time  female  enrolments  over  the  past  three  decades,  from  45%  of  total 
enrolments to 1980, to about 58% in 2008. The major change really occurred in the 1980s and 
1990s  (with  full-time  female  enrolment  surpassing  full-time  male  enrolment  in  1989);  since 
2000,  male  enrolments  have  been  growing  at  the  same  pace  as  female  enrolments  and  so  the 
female  share  of  enrolments  has  been  essentially  unchanged  since  2001.  Among  part-time 
students, women have consistently made up 60% of enrolments since the mid-1980s (although a 
decline  in  part-time  enrolments  starting  in  1992  means  that  this  60%  has  since  represented  a 
lower absolute number of students). These figures hold true more or less across the country, with 
very little variation from province to province; Prince Edward Island has the highest proportion 
of female enrolment (64%) while Saskatchewan has the lowest (57%). 

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Figure 4.19: University enrolments by gender and enrolment status (1980-2009) 

 500 000

 450 000

 400 000

 350 000

 300 000

 250 000

 200 000

 150 000

 100 000

 50 000

 -

Source: PSIS. 

0
8
9
1

1
8
9
1

2
8
9
1

3
8
9
1

4
8
9
1

5
8
9
1

6
8
9
1

7
8
9
1

8
8
9
1

9
8
9
1

0
9
9
1

1
9
9
1

2
9
9
1

3
9
9
1

4
9
9
1

5
9
9
1

6
9
9
1

7
9
9
1

8
9
9
1

9
9
9
1

0
0
0
2

1
0
0
2

2
0
0
2

3
0
0
2

4
0
0
2

5
0
0
2

6
0
0
2

7
0
0
2

8
0
0
2

Male - Full-Time

Male - Part-time

Female - Full-time

Female - Part-time

In theory, cost-sharing might be thought to affect women more than men. We know from various 
Labour Force Surveys that women tend to earn less from summer and part-time jobs than men 
(Marshall, 2010); they also tend to receive  less in transfers from their parents  (Junor & Usher, 
2004). This makes them more likely to borrow but also slightly less likely to go away for higher 
education,  which  drives  down  costs.  However,  as  the  figure  above  makes  plain,  this  does  not 
seem to have in any way stalled a long-term increase in access rates for women. 

Socio-economic Status 

Unsurprisingly, participation in Canadian higher education is positively associated with parental 
income.  As  portrayed  in  Figure  4.20,  students  from  the  three  lowest  income  quartiles  have 
roughly  similar  university  participation  rates  (among  students  18-21)  of  between  23  and  25%. 
However,  for  the  top  quartile,  the  rate  jumps  to  almost  40%.  College  participation  rates  work 
slightly differently, rising steadily from the fourth to the second quartiles before falling again for 
the top quartile. Overall, post-secondary participation rates among 18-21 year-olds vary from just 
over 40% among the lowest income quartile to just over 61% in the top income quartile. 

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Figure 4.20: Participation rates by socio-economic group, 2008 

45%

40%

35%

30%

25%

20%

15%

10%

5%

0%

Less than $33,450

$33,450 - $61,324

$61,325 - $89,199

Greater than $89,199

University

College

Note: In Canadian dollars. Constant prices (2011). 
Source: Access and Support to Education and Training Survey (ASETS), Statistics Canada. 

Showing trends over time in participation rates by socio-economic group is somewhat difficult 
because  different  researchers  have  used  very  different  survey  techniques  to  try  to  get  at  the 
question. However, as near as can be said, socio-economic patterns in participation have changed 
little  since  the  early  1990s.  Looking  at  participation  rate  data  for  18  to  24-year  olds  from  the 
Survey  of  Labour  and  Income  Dynamics,  Berger,  Motte  and  Parkin  (2009)  found  that  post-
secondary participation among individuals with family incomes of more than 100,000 dollars per 
year hovered around three-quarters from 1993 to 2006 (the figure is higher than that shown in 
figure  4.20  because  it  includes  a  slightly  larger  age-range),  while  participation  from  families 
earnings less than 25,000 dollars has floated around one-half. The gap between the two groups 
has been about 25 percentage points since the late 1990s. Berger, Motte and Parkin (2008) found 
that the gap in university participation was particularly pronounced  – individuals from families 
earning  100,000  dollars  or  more  a  year  were  consistently  more  than  twice  as  likely  to  go  to 
university as were those from families earning 25,000 dollars or less. 

As for the reasons for the disparity, probably the most definitive work is a 2007 study from Marc 
Frenette entitled Why Are Youth From Lower Income Families Less Likely to Attend University, 
which  used  the  Youth  in  Transition Survey  to  try  to  understand the  difference  in  participation 
rates  by  income  quartile.  According  to  Frenette,  84%  of  the  differences  in  participation  rates 
between the top and bottom income quartile can be explained by observable characteristics such 
as differences in PISA scores at age 15, school marks at age 15, parental influences and school 
quality. Financial constraints, at most, accounted for 12% of the difference. 

Visible Minorities  

There is no national system of administrative statistics that captures race or ethnicity of students. 
However, the Canadian Undergraduate Survey Consortium does ask students if they belong to a 

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visible  minority.  Great  care  needs  to  be  taken  in  terms  of  not  putting  too  much  weight  on 
changes over time in CUSC data because the institutional membership of the consortium changes 
from  survey  to  survey  and  this matters  doubly  in  the  case  of  a  question  like  visible  minorities 
since they are not distributed equally across the country (they are concentrated to a significant 
degree in a few major cities, most notably Toronto and Vancouver). That said, over the course of 
the 2000s, the proportion of respondents saying they  were  visible minorities rose  from 14% in 
2002 (compared to 16% of all youth 15-24 considered visible minorities by the census) to 24% in 
2011 (compared to 21% of the 2011 census population). A significant part of the increase is no 
doubt due to the influx of international students in recent years; nevertheless, it seems likely that 
the proportion of domestic students coming from visible minority students has at least kept pace 
with overall demographic trends.  

Many  Canadians  consider  the  category  of  ‘visible  minority’  to  be  of  little  use  when  analysing 
things  like  participation  rates,  because  of  the  way  it  lumps  people  with  very  different 
backgrounds together. Though there is very little solid data in Canada that examines life chances 
by ethnicity, it is generally believed that certain visible minorities (notably Chinese and Koreans) 
tend to succeed at a much higher rate than immigrants from the Caribbean. Still, one intriguing 
survey by Finnie and Mueller (2009) estimated that in fact virtually all immigrant communities 
had  a  better  chance  of  attending  university  than did  native-born  Canadians.  Chinese  and  other 
east-Asian immigrants had the highest chances, followed by immigrants from Africa. 

Aboriginal Students 

Generally speaking, Canadian governments and institutions do not report enrolment statistics on 
demographic  characteristics  such  as  ethnicity,  disability  or  Aboriginal  status.  Unlike  in  the 
United  States,  Australia,  or  New  Zealand,  in Canada it  is neither  mandatory  for  institutions  in 
most  jurisdictions  to  collect  and  report  this  data,  nor  are  approaches  to  identifying  Aboriginal 
students standardised across jurisdictions or institutions (Educational Policy Institute, 2008). 

Since  institutions  generally  do  not  collect  data  on  ethnicity  or  Aboriginal  status  at  the  time  of 
enrolment,  we  are  left  with  two  possible  sources  of  data  if  we  wish  to  examine  the  issue  of 
Aboriginal  participation  in  Canadian  post-secondary  education.  The  first  –  surveys  of  students 
done after enrolment through various means – is somewhat problematic because these kinds of 
surveys  tend  not  to  have  terribly  high  response  rates  and  the  potential  for  survey  bias  exists. 
There is also the issue of self-identification; some Aboriginal or First Nations students appear to 
be  reluctant  to  self-identify  in  such  instruments,  meaning  that  counts  from  these  sources  are 
always  somewhat  incomplete.  The  second  –  administrative  data  from  Indian  and  Northern 
Affairs  Canada  (INAC)  on  the  number  of  students  receiving  funding  through  INAC  via  their 
band council – is a consistent source of data but unfortunately an incomplete one, as it excludes 
the large numbers of Métis, Inuit, and non-Status Indians studying in Canada, as well as Status 
Indians who do not use INAC funding in order to pursue post-secondary education. Ultimately, 
many  institutions  have  only  a  hazy  idea  of  how  many  Aboriginal  students  are  attending,  and 
there  is  therefore  no  comprehensive  national  data  source  that  tracks  Aboriginal  enrolments  in 
post-secondary. 

In  2011,  however,  Higher  Education  Strategy  Associates  did  manage  to  go  institution  by 
institution  and  obtain  relatively  good  estimates  of  aboriginal populations for  both colleges  and 

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universities25.  These  are  shown  below  in  Figure  4.21.  According  to  these  statistics  –  which,  it 
should be noted are all ultimately based on voluntary self-reporting (or estimates derived from 
these),  we  estimate  that  32,000  Aboriginal  students  attended  universities  in  Canada  in  2008-
2009.  For  comparison,  the  total  Aboriginal  population  in  Canada  in  2006  was  just  under 
1,173,000, while the number of Aboriginals aged 15-25 was 212,010. We do not know – because 
the  institutional  statistics  on  which  our  estimate  is  based  tend  not  to  display  the  data  in  this 
manner  –  what  proportion  of  these  students  are  First  Nations  vs.  other  Aboriginal,  nor  do  we 
know whether the students are full-time or part-time.  

Not  surprisingly,  Aboriginal  enrolments  are  concentrated  close  to  the  major  centres  of 
Aboriginal population – primarily Northern Ontario and the four western provinces. In terms of 
Aboriginal  students  as  a  percentage  of  the  total  university  population,  estimates  range  from 
nearly 22% in Saskatchewan to 0% in Prince Edward Island (University of Prince Edward Island 
being one of the few universities that does not keep track of the number of Aboriginal students 
on campus). Nationally, the percentage is 3%, which, while not far off Aboriginal peoples’ share 
of the entire population (3.8%), is lower than their share of the population aged 15-25 (5.0%). 
Figure 4.13 shows the distribution of Aboriginal enrolments by province. 

25  Notes  about  the  quality  of  Aboriginal  data:  The  quality  of  data  and  methods  of  estimation  vary  greatly  from 
institution  to  institution.  Some  institutions  have  been  tracking  Aboriginal  enrolment  numbers  for  years,  and  are 
reasonably confident that most of their Aboriginal population chooses to self-identify. In some cases, an institution’s 
numbers  are  not  based  on  application  data,  but  rather  on  voluntary  surveys,  or  on  the  local  Aboriginal  student 
centre’s  records  of  the  number  of  students  who  used  its  services.  While  such  sources  may  seem  to  obviously 
understate  Aboriginal  enrolments,  some  institutions  extrapolate  from  this  data  to  obtain  an  estimate  of  their  total 
Aboriginal  enrolments  which  may  also  lead  to  an  overstatement  of  Aboriginal  students  on  campus.  Many 
universities also only report their Aboriginal enrolment data as ranges because of the degree of uncertainty that such 
data  collection  methods  entail.  (For  the  purposes  of  this  exercise,  when  faced  with  ranges  we  have  used  the 
midpoint.)  A  further  complication  is  that  different  provinces  and  institutions  employ  different  ways  of  counting 
Aboriginal  students:  some  report  a snapshot  of  students  registered at  a  particular  date  in  the fall,  others report  all 
enrolments  over  the  course  of  a  full  academic  year,  yet  others  employ  estimation  methods  that  are  not  quite  a 
snapshot  or  a  year-round  count.  As  an  example,  for  institutions  covered  by  the  British  Columbia  Post-Secondary 
Central Data Warehouse, for which both types of counts are available, the year-round count yields a number that is 
2.3 times as large as the snapshot. Where possible, snapshot-style data has been used; however, as the Aboriginal 
enrolment estimates presented in this section are based on a variety of methods of counting students, caution should 
be used when comparing results between provinces.  

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Figure 4.21: Aboriginal enrolments in Canadian universities, by province, 2008 

 9 000

 8 000

 7 000

 6 000

 5 000

 4 000

 3 000

 2 000

 1 000

 -

 8 104  

 6 575  

 4 370  

 4 330  

 2 552  

 1 429  

 462  

BC

AB

SK

MB

ON

QC*

NB

† 

PE

 557  

 606  

NS

NF

Note: Note: BC = British Columbia; AB = Alberta; SK = Saskatchewan; MB = Manitoba; ON = Ontario; QC = Quebec; 
NB  =  New  Brunswick;  NS  =  Nova  Scotia;  NF  =  Newfoundland;  PE  =  Prince  Edward 
Island. 
* This is only a partial estimate for Quebec as this only includes a subset of institutions. 
† Information wasn’t available for PEI. 
Source: Association of Universities and Colleges of Canada, Higher Education Strategy Associates. 

4.4  Completion Rates  

Data  on  completion  is  difficult  to  obtain  in  Canada  because  switching  programmes  and 
institutions  inside  a  programme  is  relatively  common  phenomenon,  and  therefore  calculating 
participation  rates  requires  cohort  data  that  crosses  institutions.  In  theory  the  main  Canadian 
student data system, the Post-Secondary Student Information System (PSIS), should be able to 
do  this  reasonably  easily;  however,  no  real  data  of  this  kind  has  yet  been  obtained  from  the 
system. 

However, it is possible to use the  Labour Force Survey data to estimate trends in system-wide 
drop-out rates among recent post-secondary students stretching back to 1980. A general estimate 
of  the  percentage  of  recent  post-secondary  students  who  did  not  complete  their  postsecondary 
programme can be obtained by dividing the number of Canadians aged 25 to 34 whose highest 
level  of  education  was  ‘some  post-secondary  education’  by  the  number  with  some  post-
secondary education or higher, and excluding anyone who is still currently in school. This avoids 
issues related to students switching institutions by providing a picture of completion rates for the 
system  as  a  whole,  and  somewhat  mitigates  issues  related  to  stop-outs  (that  is,  students  who 
leave school for a period of time and then recommence) by considering people who are at least 
seven  years  older  than  the  typical  post-secondary  entrance  age.  The  main  drawback  to  this 

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approach  is  that  because  of  the  way  the  Labour  Force  Survey  is  constructed,  one  cannot 
distinguish between levels of completion in the university and non-university systems – they can 
only be examined at a combined systems level.  

The data in figure 4.22 shows that the percentage of former post-secondary students in the 25-34 
year  old  population  who  dropped  out  of  their  course  has  declined  steadily  over  the  past  three 
decades, reaching an all-time low of 9.4% in 2010. This is almost a 50% decline from the 1990 
value of 17.1%. While a change in data reporting by Statistics Canada means that pre-1990 data 
is not directly comparable to post-1990 data (hence the permanent downward shift in the series 
between  1989  and  1990,  indicated  by  a  dotted  line  in  Figure  4.14),  it  appears  that  the  decline 
began sometime around 1986 – prior to that date, the drop-out rate hovered fairly steadily at just 
under 25%. 

Figure 4.22: Canadians aged 25-34 in the labour force with an uncompleted 
post-secondary education (1980-2010) 

30%

25%

20%

15%

10%

5%

0%

0
8
9
1

1
8
9
1

2
8
9
1

3
8
9
1

4
8
9
1

5
8
9
1

6
8
9
1

7
8
9
1

8
8
9
1

9
8
9
1

0
9
9
1

1
9
9
1

2
9
9
1

3
9
9
1

4
9
9
1

5
9
9
1

6
9
9
1

7
9
9
1

8
9
9
1

9
9
9
1

0
0
0
2

1
0
0
2

2
0
0
2

3
0
0
2

4
0
0
2

5
0
0
2

6
0
0
2

7
0
0
2

8
0
0
2

9
0
0
2

0
1
0
2

Source: Statistics Canada, Labour Force Survey. 

The  reason  for  this  long-term  change  is  unclear.  It  may  be  the  case  that  as  tuition  rises,  the 
phenomenon of ‘sunk costs’ is making it more psychologically costly for them to leave; whereas 
in an era of cheaper tuition, students might have decided to abandon their studies, now students 
think  they  need  to  protect  their  investment  by  ‘sticking  it  out.’  Another  possibility  is  the  job 
requirements have increased so that a post-secondary education is required more often now than 
it was in the past. This is mostly speculation; all we can say for certain here is that rising tuition 
is not being accompanied by rising levels of drop-outs.  

4.5  Evaluation 

Our evaluation here consists of answering four separate sets of questions.  

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First,  how  have  increases  in  private  funding  changed  costs  to  students?  This  is  not  a 
straightforward  question,  partly  because  Canada  is  a  diverse  federal  country  where  provincial 
governments have adopted multiple strategies, and partly because an array of subsidies blunts the 
effects of tuition fees.  

If  we  look  simply  at  the  sticker  price  of  education,  it  has  more  or  less  doubled  in  real  dollars 
across our period. Most of this increase occurred during the period of austerity in the 1990s, up 
to  about  1999;  after  that,  tuition  continued  to  increase,  but  at  a  rate  much  closer  to  that  of 
inflation. However, changes in policy to increase the number of grants and to vastly expand the 
amount of tax credits available to students meant that the effects of these tuition increases were 
mitigated  to  some  extent;  indeed,  in  some  parts  of  the  country,  net  tuition  has  not  actually 
increased at all over our period and nationally, after tax expenditures are taken into account, the 
real increase in fees is less than 25% since 1993. Although few in Canada realise it, the apparent 
massive change in cost-sharing which has taken place over the last 20 years has in fact mostly 
been a mirage – what government took with one hand, it mostly gave back with another. To put 
this another way: although fees have increased, ‘cost-sharing’ has not really changed. 

Our  second  question  here  is:  what  effect  does  an  increase  in  private  funding  have  on 
participation rates? The answer here, seemingly, is “not very much”. Participation rates were flat 
in the era of austerity, but rose by roughly 50% in the 2000s. One could try to tell a story from 
this  that  rates  remain  stable  when  tuition  rises  and  increase  when  tuition  increases  are  more 
moderate, but this is not a particularly satisfying explanation. First of all,  it  assumes that what 
deters  students  are  rates  of  increases  in  tuition  rather  than  its  absolute  amounts.  Second,  it 
ignores  the  provincial  evidence  that  seems  to  show  increases  in  participation  regardless  of 
provincial  strategies  on  tuition.  A  more  straightforward  reading  of  the  data  would  note  the 
correlation  between  total  funding  –  regardless  of  whether  it  is  private  or  public  -  and 
participation  rates.    When  one  rose,  so  did  the  other,  because  more  money  is  ultimately  how 
extra spaces are created.  

A  third  question  is  “how  have  increases  in  private  funding  affected  the  composition  of  the 
student  body”?  Rigorously,  we  cannot  answer  this  question  very  well,  since  Canadian  data 
systems at the time that tuition was rising quickly were not very well developed. Most of our best 
data comes from the period when tuition increases were moderating and increasing amounts of 
subsidies were being put into the system. However, what we can say with some assurance is that 
increasing costs did not affect gender participation rates (these continued to increasingly favour 
women over the long term regardless of what was happening to fees), and that the participation 
gap between the top and bottom income quartiles did not get any worse over our period.  

With respect to student success, it would appear that completion rates have been increasing even 
as tuition rose.  It is unclear why this is so. There is no data on which to base any conclusions 
with respect to time-to-completion. 

In  sum,  tuition  increased  substantially  over  our  period,  mostly  in  the  1990s.  Participation  also 
increased in our period, mostly in the 2000s. As far as can be ascertained, the higher tuition fees 
that took hold in the 1990s seemingly did not prevent a rise in participation, nor did they change 
the  composition  of  the  student  body,  nor  did  they  prompt  an  increase  in  the  rate  of  drop-outs 

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(quite the opposite, actually). However, it should be noted that because of an increase in various 
subsidies, real net tuition rose considerably more slowly than did ‘sticker price’ tuition. The best 
way to summarise this is that i) net tuition increases have been less significant than advertised, 
and  ii)  Canada’s  system  of  student  assistance  has  been  very  effective  in  reducing  any 
disadvantageous effects of such increases as they have happened. 

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5.  HYPOTHESIS D: INCREASING PRIVATE FUNDING 
AFFECTS STUDENT CHOICE OF HOW OR WHAT TO 
STUDY 

This  chapter  looks  at  data  relevant  to  Hypothesis  D,  which  states  that  as  private  funding 
increases,  costs  increase  to  students  and  their  families,  which  in  turn  will  have  an  impact  on 
students’ choice of how and what to study (but not necessarily on the share of students studying). 
Accordingly, this section looks at these topics: have student age, location or field of study and 
time to completion changed over time in relation to cost-sharing? 

5.1  Student Study Patterns  

In  this  section,  we  look  at  whether  or  not  the  increase  in  private  funding  –  specifically,  an 
increase in tuition fees  – changes the pattern of studies and specifically  whether  it changes the 
mode  of  study  (full-time  v.  part-time)  or  the  pattern  of  entry  into  post-secondary  (specifically, 
whether students delay entry) 

We have previously examined the issue of full-time versus part-time students in Canadian higher 
education  (see  Figure  1.2,  above).  The  proportion  of  part-time  students  fell  drastically  in  the 
1990s and stayed low until the later 2000s when their numbers began to rise again.  

As  noted  previously,  while  the  timing  of  the  initial  fall  in  part-time  enrolments  does  coincide 
somewhat with the onset of much higher tuition fees, the generally-accepted explanation for this 
had to do with the end of a period where various professional organizations were retroactively 
requiring  their  members  to  obtain bachelor’s  degrees.  There  does  not  appear  to  have  been any 
change in study patterns (i.e. study full-time vs. study part-time) that can be attributed to changes 
in tuition fees. Since fees are more or less proportional to course load, there is very little reason 
to prefer one mode of study over another. 

In terms of delayed entry, Canada does not keep statistics on this, for the simple reason that its 
national  statistical  system  cannot  identify  first-time  students  in  the  system.  However,  the 
Canadian Undergraduate Survey Consortium has been publishing a triennial survey of entering 
students for the past fifteen years or so. In 2001, they began asking a question about the student’s 
activities in the year prior to entering post-secondary education. The answer then was that 25% 
of entering students had not been enrolled in any kind of school (secondary  or CEGEP) in the 
previous year. In 2010, the most recent year for which data is available, the proportion had fallen 
to  20%.The  CUSC’s  consortium  members  change  somewhat  from  year  to  year,  and  so  this 
should not be read too definitively as evidence of a fall in the proportion of students taking gap-
years. What one can say, though, is that there is no evidence delayed entry to higher education is 
more common than it used to be.. 

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5.2  Location of Study  

One  hypothesis  about  the  effects  of  tuition  is  that  they  make  it  more  difficult  for  students  to 
study away from home. As costs rise, so the theory goes, less money is available for other living 
costs and so students become likelier to stay at home in order to economise.  

Canada has no time-series data on the proportion of students who live ‘away from home’. There 
are,  however,  statistics  on  students  who  leave  their  home  province  to  study  elsewhere.  These 
numbers have risen somewhat in recent years. Among domestic students, the proportion studying 
out-of-province rose from 7.7% to 9.4% between 1992 and 2008. 

The reason for this increase is unclear, but it is not a nationwide-phenomenon. Two provinces in 
particular are driving this phenomenon: Ontario and British Columbia, where outbound mobility 
has doubled over the course of our period. The former students have tended to leave either for 
Nova  Scotia,  Quebec  or  British  Columbia,  while  the  latter  have  primarily  gone  to  Alberta  and 
Ontario. Among the other eight provinces, only Alberta has seen any rise in outbound mobility –
for the other seven, the figures have remained essentially static for the duration of the period. 

Figure 5.1: Number of domestic students studying outside their home province 
(1992-2008) 

100 000

90 000

80 000

70 000

60 000

50 000

40 000

30 000

20 000

10 000

0

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Source: Statistics Canada, PSIS. 

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Figure 5.2: Outbound students by Province (1992-2008) 

30 000

25 000

20 000

15 000

10 000

5 000

0

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Newfoundland and Labrador
Nova Scotia
Quebec
Manitoba
Alberta

Prince Edward Island
New Brunswick
Ontario
Saskatchewan
British Columbia

Source: Statistics Canada, PSIS. 

As far as changes in international study destinations are concerned, Canada does not keep track 
of  students  who  leave  the  country.  The  only  available  data  for  this  is  data  from  UNESCO 
institute  of  statistics,  whose  international  student  counts  have  been  known  to  suffer  somewhat 
from  inconsistent  reporting  and  varying  international  standards  in  counting  international 
students. However, just looking at the period from 2000 to 2010, where the reporting is for the 
most  part  consistent,  it  seems  that  the  number  of  Canadians  studying  abroad  has  risen  from 
29,303 to 44,290, an increase of 51%. The US is by far the number one destination, making up 
63% of out-going students in 2010; however, this is down substantially from 74% in 2000. The 
country  that  seems  to  have  gained  the  most  in  terms  of  new  Canadian  students  is  the  United 
Kingdom, up 60% from 3,000 to 5,000 students. It is unknown how many of these students are 
studying at the undergraduate level and how many are studying at the graduate level. 

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5.3  Field of Study  

One hypothesis that is frequently advanced about the impact of fees is that to the extent that fees 
vary  across  fields  of  study,  they  may  induce  students  to  move  towards  ‘cheaper’  subjects  and 
away from (potentially) more valuable subjects that happen to be more expensive.  

We have already seen (see Figure 3.1) that there has been very little shifting of students between 
major fields of study. But since the gap in tuition fees by field of study at the first-degree level 
has not widened at all in the past twenty years, this should not be considered a surprise. 

Where Canada has had particular spikes in tuition at the disciplinary level has been for law and 
medicine,  which  for  the  most  part  are  second-entry  programmes.26  In  the  late  1990s,  during  a 
brief experimentation with de-regulation, many provinces allowed fees in these disciplines, along 
with  dentistry  degrees  and  MBAs,  to  rise  sharply  to  the  15-20,000  dollar  range.  A  number  of 
studies  tried  to  examine  the  effects  of  these  changes,  but  most  were  beset  by  serious 
methodological problems.27 The best of these was a paper by then-Statistics Canada analyst Marc 
Frenette (2005) entitled The Impact of Tuition Fees on University Access: Evidence From Large-
Scale  Price  De-regulation  in  Professional  Programmes.  It  concluded,  based  on  data  from  the 
National  Graduate  Survey  showing  which  graduates  went  back  for  further  study  in  law  and 
medicine  within two  years  of  finishing  an undergraduate  degree,  that  students  from  both  high-
income and low-income families had seen their participation rates in de-regulated programmes 
rise, but those of students from middle-income families had fallen.  

Frenette’s explanation for this result was that the increase in grants in the late 1990s (which were 
ostensibly directed at low-income students) might have levelled the playing field for the poor but 
not  the  middle-class.  This,  however,  is  unlikely  since  second-entry  students  are  all  considered 
‘independent’  and hence  parental income  is  not  a  factor  in  their  student assistance  calculation. 
We can therefore note that there was a change in participation patterns, but it was not entirely in 
the expected direction (didn’t affect the poorest) and that the explanation for the change is not 
clear. 

5.4  Time-to-Completion  

Time-to-completion is not something that has been of sufficient policy concern to have required 
tracking  over  time.  Because  institution-switching  is  relatively  common,  accurate  tracking  of 
times-to-completion cannot be done at the institutional level; only system-wide unit-level data-
bases  would  be  able  to  achieve  this.  British  Columbia,  Alberta  and  Quebec  possess  such 
databases, but to our knowledge have never published data on this issue. 

26 In Quebec, a certain number of seats in both law and medical school are reserved for students entering directly 
from CEGEP. Apart from that, entry into most law and medicine are essentially restricted to students who have 
completed an undergraduate degree although a few exceptionally talented students are accepted each year after just 
two or three years of undergraduate study. 
27 It is significantly more difficult to gather data on social background of students in second-entry programmes than 
it is for first-entry programme. Things like postal-code data of applicants is much harder to interpret from students in 
their mid-20s than from students at age 18 (when they are presumably living with their parents).  

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Some data is available with respect to students who both started and finished their degree at the 
same institution. According to Junor and Usher (2004), average time to completion for degrees 
was approximately one year longer than the ‘expected’ time to degree; that is, 4 years for 3-year 
degrees, 5 years for 4-year degrees and 6 years for 5-year degrees (such as Engineering). There is 
no reason to believe that this has changed a great deal over time. 

5.5  Evaluation 

Hypothesis D suggested that rather than an having an absolute effect on the level of participation, 
the  liquidity  issues  that  stem  from  increased  tuition  levels  may  lead  to  students  switching  to  a 
different  mode  of  delivery  that  enables  them  to  study  whilst  working  and  earning  income,  or 
delay participation to work to save money before entering higher education. Specifically, we had 
four sub-hypotheses about the potential impact of higher tuition, which we now examine:  

First,  with  respect  to  ‘how’  students  study,  we  have  hypothesised  that  increases  in  private 
funding  might  lead  to  changes  in  study  mode  (part-time  versus  full-time  study)  and  delays  in 
entry.  There  is  very  little  evidence  to  suggest  that  this  is  the  case.  In  the  case  of  part-time 
students, these numbers dropped substantially as tuition was increasing the fastest, and generally 
remained low for much of our period. In the case of delays of study, we have only a few partial 
observations but what data there is suggests that students are not delaying participation in higher 
education in order to work and save money for their studies. 

Second,  with  respect  to  whether  increases  in  private  funding  have  affected  students’  choice  of 
study location either in terms of where within a country they choose to study or whether it has 
affected  plans  to  study  internationally,  the  evidence  suggests  few  if  any  effects  of  tuition. 
Although  no  data  exists  to  examine  the  likelihood  of  students  leaving  home  to  attend  school, 
there does appear to have been an increase in the number of students switching provinces. There 
also appears to have been an increase in international mobility, though not as a way to avoid high 
tuition since the main destinations were the US and the UK. 

Third, with respect to whether increases in tuition have affected what students study, as we noted 
earlier, there does not appear to have been many significant changes in the  main fields of study 
enrolment  over  our  period,  so  it  is  difficult  to  conclude  that  tuition  has  caused  any  changes. 
Where there have been very radical changes in tuition  – second entry programmes such as law, 
medicine and dentistry – there have been increases in participation from both upper- and lower-
income families, with middle-income families losing out. The reason for this somewhat counter-
intuitive result is not immediately obvious. 

Fourth, with respect to increases in fees making students more efficient and taking less time to 
complete their education, there is no data available on which to test this proposition.  

In sum, though the data is admittedly limited, the rise in tuition fees in Canada appear not to have 
had any adverse effects on study mode, study timing or choice of field of study, at least as far as 
first-entry  programmes  are  concerned.  There  is  some  evidence  that  tuition  de-regulation  in 

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second-entry  programmes  has  had  an  adverse  effect  on  middle-income  students  but  not  low-
income ones. The reason for this counter-intuitive result is something of a mystery. 

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6.  CONCLUSION 

Our  study  of  Canada  divides  itself  roughly  into  two  periods.  Prior  to  1999,  public  investment 
was falling, tuition and other private contributions were rising and  participation rates were flat. 
After  1999,  public  investment  rose  more  quickly,  tuition  and  other  private  contributions 
continued to rise, and participation rates jumped sharply. 

With  respect  to  Hypothesis  A,  we  can  say  that  cost-sharing  most  certainly  increased  total 
funding,  but  this  was  not  consistently  the  case  across  the  period.  Moreover,  even  though 
significant  sums  of  money  came  into  universities  in  the  years  after  1999,  much  of  this  was 
steered  towards  purposes  other  than  undergraduate  instruction  and  even  though  funding  per 
student rose significantly, this was not enough to prevent deterioration in students-per-academic 
staff ratios. 

With  respect  to  Hypothesis  B,  we  can  say  that  institutional  strategies  changed  to  maximise 
revenue from private sources, but they also changed to maximise revenue from public sources as 
well.  Perhaps  the  most  significant  areas  of  change  occurred  in  the  pursuit  of  international 
students; much of what is seen from the outside as ‘competitive’ behaviour between institutions 
appears  to have  been  competition  for  prestige  rather  than dollars  (though over  the  longer  term 
prestige  and  income  are  presumably  correlated).  Changes  in  governance  over  our  period  have 
been minor to non-existent; in Canada, community and business leaders have always had a major 
say  in  the  governance  of  institutions,  though  this  influence  tends  not  to  be  felt  at  the  level  of 
academic programming. 

With  respect  to  Hypothesis  C,  tuition  increased  substantially  over  our  period,  mostly  in  the 
1990s, while participation also increased, mostly in the 2000s. Higher tuition fees did not prevent 
a  rise  in  participation,  nor  did  they  change  the  composition  of  the  student  body,  nor  did  they 
prompt an increase in the rate of drop-outs (quite the opposite, actually). However, because of an 
increase  in  subsidies,  real  net  tuition  rose  considerably  more  slowly  than  did  ‘sticker  price’ 
tuition. An analysis of different provincial systems suggests that there is no obvious relationship 
between net costs and participation; additionally, it would seem that Canada’s student assistance 
system played a role in mitigating the negative effects of such changes have happened. The only 
place where there do seem to have been some  effects is in the tuition de-regulation of second-
entry programmes; however, the negative effects seem to have been on middle-income students 
rather than low-income ones.  

Finally,  with  respect to  Hypothesis D,  though  the  data is admittedly  limited, the  rise  in  tuition 
fees in Canada appear not to have had an adverse effects on study mode, study timing or choice 
of field of study, at least as far as first-entry programmes are concerned.  

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REFERENCES 

Berger, J., Motte, A., & Parkin, A. (Eds.). (2009). The Price of Knowledge: Access and Student 

Finance in Canada (Fourth Edi.). Montreal: The Canada Millennium Scholarship 
Foundation. 

Educational Policy Institute. (2008). Review of Current Approaches to Canadian Aboriginal 

Self-Identification. Ottawa: The Canadian Education Statistics Council. 

Finnie, R., & Mueller, R. E. (2009). Access to Post-Secondary Education in Canada Among the 
Children of Canadian Immigrants. MESA Project Research Paper 2009-1. Toronto: 
Canadian Education Project. Retrieved from http://www.mesa-project.org/research.php 

Frenette, M. (2005). Summary of: The Impact of Tuition Fees on University Access: Evidence 
from a Large-scale Price Deregulation in Professional Programs. Ottawa: Statistics 
Canada. 

Johnson, D. (2008). Inter-Provincial Variation in University Tuition and the Decision to 

Continue to Attend University: Evidence from the Youth in Transition Survey in Canada. 
MESA Project Research Paper 2008-4. Toronto: Canadian Education Project. Retrieved 
from www.mesa-project.org/research.php 

Johnson, D., & Rahman, F. (2005). The role of economic factors, including the level of tuition, 
in individual university participation decisions in Canada. Canadian Journal of Higher 
Education, 35(3), 101–127. 

Junor, S., & Usher, A. (2004). The Price of Knowledge. Montreal: Canada Millennium 

Scholarship Foundation. 

Marshall, K. (2010). Employment Patterns of Postsecondary Students. In Perspectives on Labour 

and Income. Statistics Canada. 

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APPENDIX: LIST OF INTERVIEWED EXPERTS 

Name 

Ken Norrie 

Kathleen Massey  

Robert Clift 

Herb O’Heron 

Paul Vigneault 

Tom Traves 

Jennifer Humphries 

Position / Affiliation 

Ex-Dean, University of Alberta 
Ex-Provost, McMaster University 
Ex-Director Research Higher Education 
Quality Council of Ontario 
Registrar, McGill University  

Executive Director, Confederation of 
University Faculty Associations of British 
Columbia 
Director of Research, Association of 
Universities and Colleges of Canada 
Conseil Superieur de l’Education 

Ex-President, Dalhousie University 

Vice-President, Canadian Bureau of 
International Education 

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ENGLAND 

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ACKNOWLEDGEMENTS 

The authors would like to acknowledge the support in data research and interpretation provided 
by Alison Johnston, Ph.D. (Assistant Professor, Oregon State University). 

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1.  INTRODUCTION 

1.1  Overview of Higher Education in England  

England  is  one  of  the  four  countries forming  the  United  Kingdom  (UK),  the  other  three  being 
Wales, Scotland and Northern Ireland. According to the 2011 census, the UK’s total population 
is 63 million, of which 53 million live in England, 5 million in Scotland, 3 million in Wales and 
just  under  2  million  in  Northern  Ireland.  Though  all  four  countries  of  the  UK  share  a  head  of 
state  and  send  Members  of  Parliament  to  Westminster,  three  of  the  four  countries  (Wales, 
Scotland, and Northern Ireland) also have their own parliaments. Higher Education is one of the 
policy  areas  that  has  been  devolved  to  regional  parliaments.  Higher  Education  in  Wales, 
Scotland  and  Northern  Ireland  are  therefore  under  the  jurisdiction  of  Cardiff,  Edinburgh  and 
Belfast, respectively. England does not have its own Parliament, so policy there is made by the 
Union government at Westminster.  

As  a  result,  the  UK  in  effect  has  four  separate  systems  of  higher  education,  albeit  with  many 
shared characteristics. The largest of these – the English one, which contains about 85% of UK 
students  – has  seen  some  very  significant  experimentation  over  the  past  fifteen  years.  For  that 
reason,  this  case  study  will  focus  as  far  as  possible  on  the  English  portion  of  the  system.  On 
occasion,  other  countries’  systems  and  their  results  will  be  used  to  highlight  the  effects  of 
changes  in  the  English  system,  since  in  a  sense  they  form  natural  control  groups  to  the 
‘experiments’ in higher education funding implemented in England (see below). 

In England, prior to entering higher education, students flow through a system known as ‘16-19 
secondary  education’.  After  completing  their  General  Certificate  of  Secondary  Education 
(GCSE) at age 16, students may continue in secondary school, or attend other institutions known 
as sixth-form colleges or further education colleges. The landscape of providers varies according 
to  local  arrangements,  but  all  areas  provide  young  people  with  a  wide  choice  of  programmes 
leading  to  general/academic,  pre-vocational  or  vocational  qualifications.  Qualifications  are 
provided by centrally regulated awarding organisations, external to the school or college within a 
qualifications  system  common  to  England,  Wales  and  Northern  Ireland.  Students  wishing  to 
continue  on  to  higher  education  must  pass  a  set  of  exams  called  the  General  Certificate  of 
Education, Advanced Level (known as A-levels). 

Since  the  Further  and  Higher  Education  Act  of  1992  ended  the  'binary  divide'  between 
universities  and  polytechnics,  England  has  had  a  unitary  higher  education  system  where 
professional institutes such as polytechnics and Fachhochschulen that are seen on the continent 
are  merged  into  the  university  sector.  Higher  Education  Institutions  (HEIs)  in  England  are 
autonomous  self-governing  bodies.  They  receive  funds  from  a  variety  of  sources;  state  funds 
presently  form  a  very  low  proportion  of  overall  funds,  though  this  was  not  always  the  case. 
Access  to  the  title  of  university  is  controlled  by  Government  on  a  UK-wide  basis.  Though 
individual institutions have wide latitude in developing curriculum, all institutions structure their 

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programmes along broadly similar lines within a three cycle framework, which conforms to the 
European Higher Education Area (EHEA) qualifications framework. 

In addition to the 130public HEIs in England, the term university has also been granted to three 
private institutions that have passed the relevant quality assessment tests as well: the University 
of Buckingham which is a comprehensive arts and science university dating from the 1980s, and 
two institutions that specialise in professional (mainly legal) studies: BPP University college and 
the University of Law. Private providers receive no direct government funding, but their students 
may be eligible for public financial support. Data for private institutions are not usually collected 
or  reported  separately  from  that  of  public  institutions;  therefore,  unlike  several  of  the  other 
chapters in this volume, data for the private sector will not be reported separately here. 

England  was  one  of  the  first  countries  in  Europe  to  introduce  substantial  fees,  first  for 
international students, then professional Master students and finally in 1998 for undergraduates 
as  well.  It  has  followed  a  punctuated  equilibrium  model  for  increasing  fees;  after  their 
introduction in 1998, they were held constant in nominal value for eight years, and then tripled. 
Six years later they  were essentially  tripled again. Since 2012, public universities have had the 
freedom  to  increase  tuition  fees  to  up  to 9000 British pounds28  a  year,  and  a  majority  of  them 
have raised tuition to this limit. The government does provide certain incentives for institutions 
to keep tuition below 7000 pounds, but few institutions do.  

1.2  Key Higher Education Stakeholders 

Since 2009, the Government Ministry responsible for higher education has been the Department 
of  Business,  Industry  and  Skills;  prior  to  that,  it  was  integrated  with  the  Department  of 
Education. There is a Minister of Business Industry and Skills, as well as a more junior minister 
specifically for Higher Education. 

The  government  does  not  distribute  funds  directly  to  educational  institutions.  This  happens 
through  the  Higher  Education  Funding  Council  for  England  (HEFCE),  an  arms-length  body 
responsible  for  the  distribution  of  public  funds  for  teaching  and  research  infrastructure  across 
UK  institutions.  Six  other  sectoral  research  councils  (Economic  and  Social  Research  Council, 
Arts  and  Humanities  Research  Council,  Biotechnology  and  Biological  Sciences  Research 
Council,  Natural  Environment  Research  Council,  Engineering  and  Physical  Sciences  Research 
Council,  Medical  Research  Council)  distribute  funds  on  a  competitive  basis  to  individual 
researchers;  a  seventh,  the  Science  and  Technology  Facilities  Council,  distributes  funding  for 
scientific infrastructure. 

The  Quality  Assurance  Agency  (QAA)  is  an  independent,  non-profit  body  that  oversees 
standards  in  higher  education  in  England.  It  sets  out  expectations  in  relation  to  academic 
standards, quality, and the provision of information and then reviews institutions periodically to 
ensure that these standards are being upheld. Its board members are drawn from the university 

28 As of April 2014, 1 British pound = 1.21 euros. 

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sector,  and  in  particular  from  executive  heads.  It  is  not  itself  an  accrediting  agency.  The 
government 
the  QAA  makes 
recommendations to the Department on issues relating to the award of degree-granting powers. 

institutions,  but 

itself  retains 

to  accredit 

the  power 

The university sector itself has a number of representative bodies. Universities UK (UUK) is the 
apex  body  that  represents  the  sector  as  a  whole;  however,  there  are  also  a  number  of  other 
representative  groupings  of  institutions  based  on  their  profile.  The  most  research-intensive 
universities (which also tend to be the older universities) are regrouped in the Russell Group of 
Institutions. A slightly less research-intensive (and generally younger) group of institutions is the 
‘1994  group’.  The  newest  institutions  are  represented  either  by  ‘Million  +’,  or  by  ‘Guild  HE’ 
(the  latter  containing  a  large  number  of  specialist  colleges).  Student  unions  from  across  the 
country are collectively represented by the National Union of Students. 

1.3  How Governments Fund Institutions 

The funding formula for higher education in England since 1986 has been primarily based on a 
weighed student enrolment formula. That is to say, while there are numerous funding envelopes 
available  to  institutions  (see  below),  the  majority  of  the  money  provided  to  institutions  by 
government  (and  delivered  through  HEFCE)  came  through  a  system  that  provided  institutions 
with cash based on the number of undergraduates they enrolled in various fields of study. 

In the HEFCE system, fields of study are divided into four categories. Group A contains clinical 
medicine, dentistry and veterinary science. Group B contains laboratory-based subjects such as 
Science, Engineering and Technology. Group C is what is known as ‘intensive teaching, studio 
and  fieldwork’,  which  includes  Art,  Design  and  Mathematics.  And  Group  D  includes 
Humanities,  Social  Sciences,  Law  and  Business.  At  different  times,  students  in  each  of  these 
groups have been worth a different amount to universities. If we think of Group D as being the 
base, Group A has usually been  worth about 5 times Group D, Group B has been worth twice 
Group  B  and  Groups  C  has  been  worth  1.3  to  1.5  Group  D.  However,  after  the  changes  in 
2012/13 and the introduction of much higher fees following the Browne report, students enrolled 
in groups C and D no longer carry any public subsidy at all, Group C students carry a subsidy of 
1,500 pounds and Group A carry a subsidy of 10,000 pounds. 

1.4  History of Cost-Sharing29 

Prior to the 1990s, funding of higher education in England (which consists almost exclusively of 
public  institutions)  was  entirely  public;  domestic  undergraduate  students  were  not  charged 
tuition  and,  if  they  came  from  a  low-income  household,  were  eligible  to  receive  grants  from 
Government  to  cover  living  costs.  The  Thatcher  government  introduced  non-income-assessed 
mortgage-style  student  loans,  rather  than  grants,  to  provide  additional  resources  to  students  in 
1990, and this initiated an accelerated transition from grant-financing of students’ living costs to 

29 The main author of this section is Alison Johnston. 

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loan-financing (Pennell & West, 2005). Nevertheless, tuition fees remained at zero until 1998.30 
The transition of the British higher education from an elite sector, where roughly 5% of school 
leavers entered university in the 1960s, to one where 30% of school leavers entered university by 
the 1990s placed considerable financial strain on higher education institutions (HEIs). Between 
1980/81  and  1999/00,  real  funding  per  student  was  halved  due  to  rising  student  numbers  and 
insufficient  growth  in  public  funding  (Greenaway  &  Haynes,  2003).  The  merger  of  40 
polytechnics,  which  were  previously  funded  through  the  Polytechnics  and  Colleges  Funding 
Council, into the university sector in 1992 by the Major government, was a particular shock to a 
system  that  had  already  witnessed  steady  declines  in  student  funding.  Greenaway  and  Haynes 
(2003) and Barr (2004) outline that these funding pressures placed strain on student/faculty ratios 
and  remuneration,  recruitment  and  retention  of  faculty,  which  threatened  the  UK’s  research 
capacity. 

Despite increasing student numbers and declines in funding, universities across England and the 
United Kingdom were unable to charge tuition fees. The power to levy tuition fees in England 
ultimately  requires  an  act  of  Parliament.  Given  the  political  unpopularity  of  levying  fees  in 
England and across the UK, where public opinion firmly supported public funding for university 
education,  politicians  were  wary  of  introducing  fees  to  a  public  debate,  especially  around 
election  periods.  Consequently,  cost-sharing  instruments  for  domestic  students  remain  largely 
outside of the hands of British universities, although universities have long had the capacity to 
charge fees  for international students and British post-graduate students in Master courses (see 
below). 

Acknowledging  the  significant  funding  problems  of  British  universities,  John  Major’s 
Conservative  government  established  a  National  Committee  of  Inquiry  into  Higher  Education 
(the  Dearing  Commission)  in  1996  to  discuss  alternative  funding  streams.  Fearing  possible 
political  backlash  from  the  discussion  of  the  introduction  of  tuition  fees  –  the  next  general 
election was to be held in May of 1997 – the Committee was given a broad remit to consider the 
state of British higher education in general and was scheduled to present its findings in summer 
1997,  ensuring  that  higher  education  finance  was  off  the  election  agenda  (Barr  &  Crawford, 
1998). The report was wide-sweeping, establishing recommendations on widening participation, 
faculty  retention  and  quality  assurance,  among  other  things.  Among  its  most  controversial 
components,  however,  was  a  shift  in  funding  towards  components  that  were  ruled  by  ‘student 
choice’,  or  fees,  although  the  Dearing  Report  specified  that  student  contributions  should  be 
income-contingent based on the graduate’s salary after leaving university  (Dearing Committee, 
1997). Realising the political difficulty of introducing fees, even after the election, the report, in 
line  with  a  growing  policy  consensus  within  the  country,  supported  fees  only  if  contributions 
were  supported  by  income-contingent  loans  (Barr  &  Crawford,  1998).  This  recommendation 
would shape the political landscape of all future tuition fee rises in England; in 2006 and 2012 
when tuition-fee caps for public institutions were increased to 3,000 pounds and 9,000 pounds 
per annum, respectively, income-contingent loan assistance for tuition fees was matched on a 1-
to-1 basis, regardless of a student’s household income. 

30 For better readability, the term ‘(tuition) fees’ refers to fees for undergraduate domestic students in this section 
unless otherwise noted. 

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Tuition  fees  were  introduced  in  England  (and  -  albeit  only  for  a  short  period  in  the  case  of 
Scotland  -  the  other  countries  of  the  UK)  in  the  1998  Higher  Education  Act.  Given  policy-
makers’ concern for how fees would influence access, fees were applied on a means-tested basis; 
incoming-students  from  households  whose  annual  income  was  below  20,000  pounds  were 
completely  exempt from the 1,000 pound per annum fee, while students from households with 
annual  incomes  between  20,000  pounds  and  30,000  pounds  were  subject  to  a  reduced  fee 
(Goodman & Kaplan, 2003). Realising that a conditional 1,000 pounds per annum contribution 
from  undergraduates  would  not  quell  funding  gaps  within  the  higher  education  sector, 
universities  continued  to  lobby  Government  for  an  increase  in  student  contributions.  After  the 
2001  general  election,  the  Labour  Government  launched  a  White  Paper  examining  the  further 
increase  of  tuition  fees.  After  a  tumultuous  vote  in  the  House  of  Commons,  the  2004  Higher 
Education  Act  introduced  a  universal  3,000  pounds  fee  cap.  Unlike  the  previous  system,  no 
student  was  exempt  from  the  fee  level  based  upon  his/her  household  income.  Under  the  new 
system,  introduced  in  2006,  universities  could  charge  up  to  3,000  pounds  per  student.  All 
students  would  be  eligible  to  receive  income-contingent  student  loans  from  the  Student  Loans 
Company  to  cover  tuition  and  a  loan  for  a  portion  of  living  costs  from  the  government.  Upon 
graduation, students’ loan repayment was a function of their income; students would repay 9% of 
income  above  15,000  pounds  (hence,  graduates  with  low  annual  earnings  paid  nothing),  were 
charged a zero real rate of interest on all loans, and had 25 years to repay their loan debt (any 
remaining debt after 25 years was forgiven by the Treasury) – see Table 1.  

Though the 2006 system shifted the funding of higher education onto students, increasing cost-
sharing  in  the  English  higher  education  sector  in  principle,  in  practice,  the  state  continued  to 
heavily subsidise student borrowing. Estimates of the loan subsidy, stemming from the zero real 
interest rate and the debt write-off, ranged from 25% to 30%, indicating that roughly a quarter to 
a third of all lending is not repaid (Johnston & Barr, 2013). In 2007/08, the zero real interest rate 
and  25-year  write-off  cost  approximately  1  billion  pounds,  out  of  total  lending  to  students  in 
England of 3.9 billion pounds, over a tenth of public spending (7.24 billion pounds) on English 
higher education (HEFCE, 2008).  

It was agreed that Government would reconsider the level of the fees cap, but a decision on the 
matter  was  postponed  until  after  the  May,  2010  general  election.  The  Independent  Review  of 
Higher Education Funding and Student Finance (the Browne Review) was initiated in late 2009, 
in  order  to  collect  evidence  for  wide-ranging  changes  to  higher  education  funding  in  England, 
specifically examining the placement of the fees cap and changes to student support and financial 
assistance. Even before the release of the Browne Review, it was apparent that tuition fees would 
increase  as  austerity  in  government  finances  began  in  reaction  to  the  global  financial  crisis. 
Government  announced  in  the  Treasury’s  (October)  2010  Spending  Review  that  the  overall 
resource budget for higher education would decline by 40%, from 7.1 billion pounds in 2010 to 
4.2 billion pounds by 2014-15, with all of this reduction being achieved in the HEFCE teaching 
grant  (HM  Treasury,  2010).  Funding  of  the  more  expensive  science  and  technology  subjects 
(Groups  A  and  B)  was  partially  preserved,  arts,  humanities,  social  sciences  and  other  subjects 
falling into Groups C and D would witness the complete elimination of their bloc-teaching grants 
by 2014/15. In order to compensate for this funding short-fall, fees were expected to rise.  

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In  December,  2010,  Parliament  agreed,  by  a  323  to  302  vote,  to  set  a  maximum  cap  for 
university  fees  of  9,000  pounds  per  year.  Government  created  a  core  reduction  mechanism 
whereby  universities  charging  fees  over  6,000  pounds  would  have  their  student  number 
allocations reduced by up to 8%. One feature of both this reform and the 2006 reform  was the 
idea that  setting  a  maximum tuition fee  and  allowing  institutions  freedom  to  charge  what  they 
wished below this level  would create a competitive market. In fact, in neither instance did this 
turn out to be the case. In 2006, 94% of universities in England chose to charge the full 3,000 
pounds;  as  of  mid-2013,  roughly  three-quarters  of  English  Universities  were  charging  the  full 
9,000 pounds permitted by the new law. As a result of the increase in the tuition fees cap, the UK 
Government  made  several  important  changes  to  study  aid,  mostly  in  the  form  of  student  loan 
design. Three new tuition loan expansions took place in the 2012/13 academic year: i) part-time 
students became eligible for publically subsidised tuition fee loans, for up to 6,750 pounds per 
annum; ii) full-time students studying at private institutions witnessed an increase in the annual 
tuition loan they were eligible for, from a maximum of 3,375 pounds per annum to a maximum 
of 6,000 pounds per annum, and; iii) full-time students studying at public institutions witnessed 
an increase in the annual tuition loan they were eligible for, from a maximum of 3,375 pounds 
per  annum  to  a  maximum  of  9,000  pounds  per  annum.  Repayment  terms  for  tuition  and 
maintenance  loans  taken  out  by  students  entering  university  in  2012/13  (or  later)  have  also 
witnessed  changes,  relative  to  the  2006  system  (see  Table  1).  Though  the  2012  reforms  have 
significantly transferred the costs of higher education onto the graduate and away from the state, 
the latter continues to substantially subsidise student lending. 

It is worth noticing that the fee regime described here only applies to ‘home’ students (i.e. UK 
and EU/EEA students). International students are charged much higher fees. 

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Table 1.1: England’s system of federal financial aid for full-time undergraduates  

The 1998 system 

The 2006 system 

The 2012 system 

Tuition Fees for UK 
and EU students 

Loan Amount for 
fees for UK and EU 
students 

Maintenance 
Grant (UK 
residence 
conditions apply) 

Maintenance 
Loan31 (UK 
residence 
conditions apply) 

Loan Interest Rate 

Repayment 
Threshold32 

1,000 pounds p.a. for 
students with family 
income above 30,000 
pounds. Partially waived for 
students with household 
incomes between 20,000-
30,000,pounds fully waived 
below 20,000 pounds 

No loans for fees 

Up to 1,000 pounds p.a. 
(grant system was 
suspended between 1999 
and 2004) 

Up to 3,905 pounds for 
maintenance, if low-income 

0% in-study, 0% in 
repayment 

10,000 pounds 

Repayment Rate 
(above threshold) 

9% 

3,000 pounds p.a. 
maximum 

9,000 pounds p.a. 
maximum 

No exemptions 

No exemptions 

Up to 3,000 pounds p.a. 
for (new) full time 
students 

Up to 9,000 pounds p.a. 
for (new) full time 
students 

Up to 2,900 pounds 
p.a., contingent on 
household income  

Similar to 2006 system 
(increasing with inflation) 

Similar to 1998 system 
(increasing with 
inflation) 

Similar as the 1998 
system (increasing with 
inflation) 

linked to inflation in-
study, linked to 
inflation in repayment 

3% in-study, 0-3% in 
repayment, based on 
income. 

15,000 pounds 
Non-indexed before 
2012. Annually with 
inflation from 2012 

25 years 

9% 

21,000 pounds 
Annually with earnings 
from 2016 

9% 

30 years 

Life 

Repayment Period 
– after which loan 
is forgiven 
Source: Chowdry, Dearden, & Wyness, 2010; Goodman & Kaplan, 2003. 

25 years 

31 Amounts depend on whether the student lives away from home or not and whether the student lives in London or 
not. 
32 Graduates only have to start repayment once they have an annual income above this threshold. 

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1.5  History of Enrolment  

Enrolment  in  English  universities  has  been  rising  steadily  during  our  period  of  investigation. 
Full-time enrolment rose by over 50%, from roughly 900,000 students to 1.4 million. Part-time 
enrolment rose more slowly, from 550,000 in 1995 to 780,000 in 2006. After the 2006 reforms, 
part-time enrolment began declining, falling to just under 700,000 in 2011. 

Figure1.1: English university enrolment over time (1995-2011) 

1 600 000

1 400 000

1 200 000

1 000 000

800 000

600 000

400 000

200 000

0

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Full-time

Part-time

Source: Higher Education Statistics Agency. 

Figure 1.2 looks at participation by students in the four age-years with the highest participation 
rates  in  higher  education.  This can differ  somewhat  by  country,  but  in  England  it  is the  18-21 
year-old  age  group,  which  make  up  roughly  60%  of  the  entire  student  population  (890,000  in 
total  in  2011-2012).  Available  data  on  students  by  age  reach  back  only  to  2001,  so  the  data 
presented here are for a more limited period than in the previous graph. In the period running up 
to the 2006 reforms, participation rates  were relatively steady at 26-27%. What happened after 
the 2006 reforms, which substantially increased the cost of education to most students, was that 
participation  began  to  increase,  up  to  30%  in  2009  and  then  to  32%  in  2011.  Some  of  the 
increase in 2011 may however have something of a double-cohort effect as students who used to 
take  ‘gap  years’  (that  is  a  year  off  after  finishing  school  and before  entering  higher  education, 
usually  spent  travelling  or  working)  chose  to  forego  it  in  order  to  get  in  a  year  of  higher 
education before the planned rise in tuition in 2012. 

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Figure1.2: Participation rates 18-21 (2001-2011) 

40%

35%

30%

25%

20%

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Source: Higher Education Statistics Agency, Office of National Statistics. 

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2.  HYPOTHESIS A: AS PRIVATE FUNDING INCREASES, 

INSTITUTIONAL REVENUE INCREASES  

This  chapter  looks  at  data  relevant  to  Hypothesis  A,  which  states  that  as  private  funding 
increases,  institutional  revenue  increases,  but  only  if  public  funding  remains  constant.  That 
means that it will examine whether: 
 
 
 

there has been an increase in private funding 
there has been a concurrent change to public funding 
there has been a total increase in funding and how this is related to changes in private and 
public revenues. 

Changes  in institutional  funding  will  be  considered  both  in  terms  of  total  institutional  revenue 
and relative to the number of students. 

2.1  Changes in Institutional Revenues over Time 

Figure  2.1  portrays  the  funding  to  universities  by  source.  Prior  to  1995,  tuition  was  free  for 
domestic students. However, this did not mean that – as in Scandinavia – the state was bearing 
the entire burden of supporting education. Not only did universities earn a substantial portion of 
their  funding  from  private  sources  such  as  the  sale  of  goods  and  services,  they  were  earning 
substantial amounts from international student fees and fees associated with professional Master 
courses. Thus, even when tuition was ‘free’ for domestic students, 23% of total funds still came 
from students in one way or another. 

What  is  intriguing  about  Figure  2.1  is  the  way  that  the  introduction  of  tuition  fees  in  1998 
appears  to  have  barely  affected  university  income.  The  trend  from  1994  to  2009  was  a  very 
gentle increase in income from all sources, from 11.6 billion pounds in 1994 just under 24 billion 
pounds in 2010, when the public spending review reduced the amount of public money available 
by about a billion.  

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Figure 2.1: Funding to universities, in millions of 2011 pounds 

30 000

25 000

20 000

15 000

10 000

5 000

0
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Government

Students

Other Private

Source: Higher Education Statistics Agency. 

Figure 2.2 shows the proportion of total funding by source and demonstrates how the sources of 
university income have changes over time. Essentially, prior to 1997, public income was falling 
gently as a share of total income while ‘other’ income was rising. After 1997, the public share 
rose  again  very  slightly,  mostly  at  the  expense  of  tuition  income  (as  noted  above,  this  was 
somewhat remarkable because it occurred at the same time as the introduction of tuition fees). 
Thereafter, the government share stayed relatively constant at around 55% of total expenditures 
until 2006 and the second tuition fee reform. From that point on, though the absolute amount that 
government was spending was growing in real terms, it grew more slowly than fee income. This 
resulted in a fairly significant shift over the period from 2005 to 2011  – the state share of total 
funding fell from 53% to 44% while the share from student fees rose from 24% to 36%. 

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Figure 2.2: Proportion of total funding by source (1994-2011) 

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Government

Students

Other Private

Source: Higher Education Statistics Agency. 

Another way of looking at investments in higher education is to look at spending as a percentage 
of GDP33. This is shown below in Figure 2.3. As it turns out, total spending did fall in the mid-
1990s, from 1.58% of GDP to 1.39% in 1999, not so much because investments were decreasing, 
but because the economy was growing so quickly. Spending as a percentage of GDP rose from 
2000  to  2008,  when  it  reached  its  peak  at  1.65%.  But  by  2011,  stagnation  in  overall  spending 
combined with even the small amounts of economic growth that have been possible in the wake 
of the financial crisis meant that higher education as a percentage of GDP slid back down again 
to 1.51%. 

33 The UK does not normally provide GDP figures by constituent country. There is, however, an alternative measure 
known as ‘Gross Value Added’. Over the past 20 years, England’s GVA has consistently been within a couple of 
percentage points of 85% of that of the UK as a whole. In order to derive ‘English’ GDP, we have therefore simply 
multiplied UK GDP by 0.85. 

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Figure 2.3: Higher education funding by source as a % of GDP (1994-2011) 

1,8%

1,6%

1,4%

1,2%

1,0%

0,8%

0,6%

0,4%

0,2%

0,0%

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Government

Students

Other Private

Source: Higher Education Statistics Agency. 

Yet another way that expenditures in higher education can be measured is through spending per 
student.  This  tells  a  slightly  different  story  again.  As  we  saw  in  Figure  1.1,  above,  student 
numbers were growing fairly steadily throughout the period of investigation. But as Figure 2.4 
shows,  funding  per  full-time  equivalent  (FTE)  student  increased  even  more:34  funding  per 
student increased by just over 35% between 1995 and 2008. The figure per student begins to fall 
away sharply after that, partially because money becomes less available (see Figure 2.1) but also 
because enrolment was growing strongly. 

Figure 2.4: Funds per FTE student by source in real 2011 pounds (1995-2011)  

16 000

14 000

12 000

10 000

8 000

6 000

4 000

2 000

0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Government

Students

Other Private

Source: Higher Education Statistics Agency. 

34 Full time equivalent students have been calculated by multiplying each part-time student by 0.3 and adding to the 
number of full-time students. If one were to change assumptions, and assume that a PT student is re worth more than 
0.3 FT students, then the per-student funding figure would decline slightly. 

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2.2  Institutional Expenditures 

As we have seen, per-student institutional income over our period rose and then levelled off or 
even fell slightly towards the end. However, the fact that institutional income has been rising in 
our period does not mean that it has necessarily been invested to the benefit of students. Money 
might be invested in non-instructional missions that might lead students to question whether they 
are getting value for their money and thus undermine the case for cost-sharing. 

One  way  to  examine  this  is  to  look  at  changes  in  students-per-academic staff  ratios  and  relate 
them  to  changes  in  funding.  Figure  2.5  shows  the  ratio  of  FTE  students to  full-time  academic 
staff35 in England from 2003 onwards.36 Though this figure does not cover our entire period, it 
does  cover  the  critical  period  on  either  side  of  the  2006  reforms  which  brought  about  both  a 
major increase in total income and a shift in the cost-burden towards students. 

What Figure 2.5 shows is that while total income was rising in the period 2007-2008, students-
per-academic  staff  ratios  were  staying  absolutely  flat  (that  is  to  say,  as  far  as  student-faculty 
interaction  is  concerned,  students  were  paying  more  for  the  same).  Once  the  rise  in  fees  was 
over,  and  total  income  per-student  started  to  fall  because  of  growing  enrolments  and  the 
problems caused by the recession, students-per-academic staff ratios started to rise (or, to put it 
another way, students were paying the same and getting slightly less). 

35 Academic staff includes all staff member whose academic employment function is either teaching only or 
teaching and research (see HESA definition at: http://www.hesa.ac.uk/content/view/2937). 
36 Some pre-2003 data on full-time professor numbers are available, but they appear not to be compatible with the 
post-2003 data. 

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Figure 2.5: Per-student income, in 2011 pounds, vs. students-per-academic staff 
ratio (2003-2011) 

18 000

17 000

16 000

15 000

14 000

13 000

12 000

18

17

16

15

14

13

12

2003

2004

2005

2006

2007

2008

2009

2010

2011

£/student (left-side)

Students / academic staff (right axis) 
Student/prof (right-side)

Source: Higher Education Statistics Agency. 

That  said,  an  examination  of  English  universities’  expenditure  by  activity  shows  remarkably 
little  change  over  time.  The  portion  of  total  income  that  goes  to  academic  salaries  does  fall 
slightly,  from  43%  to  39.5%,  and  administration  rises  from  12%  to  15%,  but  apart  from  that 
there is very little change over time – see Figure 2.6. 

Figure 2.6: Shares of total expenditure by activity, select years  
(1995/96-2011/12) 

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

1995/96

2000/01

2005/06

2011/12

Source: Higher Education Statistics Agency. 

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Other

Grants/contracts

Residences/Catering

Premises

Administration

Academic Services

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2.3  Evaluation 

The questions posed at the outset of these papers with respect to cost-sharing were as follows: 
‘Has cost-sharing increased total funding?’ and ‘how was additional money spent’?  

With respect to the first question, the answer is much more complicated than it first appears. The 
first major change in cost-sharing in 1998, which created a series of means-tested 1000 pounds 
tuition fees, was momentous in the sense that it created a precedent for domestic students to pay 
tuition  fees  for  a  first  undergraduate programme.  But  in  terms  of  overall  cost-sharing  it  meant 
almost nothing; the sums raised compared to the sums available from international students and 
other  fee-paying  domestic  students  were  tiny  and  government  investment  was  increasing  so 
quickly at the time that the overall student share of funding actually fell after the introduction of 
fees.  The 2006 change was clearly additive; income from students increased strongly at a time 
when government was increasing its investments considerably.  Finally, the 2012 changes  were 
clearly and deliberately designed with a view to making student fees replace public investment. 
So,  at  different  times,  fee  policy  has  had  different  effects  with  respect  to  total  funding.  As  of 
2012,  one  can  say  without  contradiction  that  over  the  entire  period  student  fees  have  proved 
entirely  additional  and  have  not  displaced  public  funds.  With  the  current  rapid  cutback  in 
government funding, it is not clear if this will continue to be the case past 2015. 

As for how the money was spent, such details as are available on institutional spending suggest 
that there has not been a very large shift in actual spending patterns, though such change as there 
has been has been away from academic departments. It can be confirmed that the influx of new 
money did not lead to a better students-per academic staff ratio; in fact it has deteriorated slightly 
over  the  last  ten  years.  It  would  therefore  be  difficult  to  argue  that  the  extra  investment  by 
students  and  government  have  led  to  significant  improvements  in  students’  educational 
experiences, in so far as the students-per-academic staff ratio can be taken as an indicator of the 
quality  of  students’  experiences.  That  said,  one  should  probably  not  overstate  the  degree  of 
deterioration, either. 

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3.  HYPOTHESIS B: AS THE INCENTIVES TO EARN 

PRIVATE FUNDING INCREASE, INSTITUTIONS BECOME 
MORE RESPONSIVE TO STUDENT DEMAND 

This  chapter  looks  at  data  relevant  to  Hypothesis  B,  which  states  that  as  incentives  to  earn 
private  funding  increase,  institutions  become  more  responsive  to  user  demand.  However,  this 
expected  effect  is  conditional  on  the  attractiveness  of  these  private  revenues  and  whether 
increasing these revenues has trade-off effects for the overall behaviour or prestige of HEIs.  

Various aspects of responsiveness will be examined, including changes to provision, enrolment 
and the connection between HEIS and users. If no changes to responsiveness are visible, this is 
likely  related  to  the  incentive  structure  present  in  the  higher  education  system,  which  might 
favour other behaviours such as the maximisation of public over private funding. 

3.1  Enrolment by Discipline  

One  hypothesis  about  the  effects  of  fees  is  that  they  make  institutions  desirous  of  increasing 
revenues by focusing on programmes that are popular or lower-cost to deliver (these tend to be 
‘soft’  disciplines,  paper  and  pencil  subjects-areas).  This  may  lead  to  overall  changes  in  the 
discipline profile of a national higher education system.  

As Figure 3.1 shows, there is almost no evidence of this in England. In fact, the opposite is the 
case – despite enrolment rising by 50%, there has been very little change in the distribution of 
students by field of study. Basically, engineering has fallen from about 13% of enrolments to 9% 
while  health  studies,  sciences  and  humanities  have  all  gained  between  one  and  one-and-a-half 
percentage points. It should be noted, though, that most of engineering’s decline happened prior 
to 2000 – the large increases in tuition in 2006 had essentially no effect at all on enrolment.  

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Figure 3.1: Distribution of enrolment (FT & PT) by field of study (various years 
1994-2009) 

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

Services

Health, Welfare

Engineering

Science, Math, Computing

Soc. Sci, Business, Law

Humanities, Arts

Education

1994

1998

2002

2006

2009

Source: Higher Education Statistics Agency. 

3.2  Enrolment Patterns by Mode  

In  some  countries  the  fee  structure  may  make  it  advantageous  for  institutions  to  increase  the 
number  of  part-time  students.  This  is  not  the  case  in  the  UK,  where  since  1998  the  part-time 
student  fee  has been  set proportionately  to  those  of  full-time  students.  There  is  therefore  not  a 
particularly  good  financial  reason  why  part-time  students  should  have  been  favoured  or 
disfavoured during these years. And yet, even in the absence of policy stimulus, there has been 
significant  change  in  the  student  profile  over  our  period.  As  shown  in  Figure  2.3,  from  1995 
through  to  2001,  the  percentage  of  total  students  studying  part-time37  rose  from  31%  to  41%. 
From there until 2006, it began to slide back towards 39%. Then, in 2006, at the same time as the 
second major change in tuition fees, the part-time proportion fell significantly and has continued 
falling ever since; down to less that 33% in 2011. 

One way to interpret this data would be to note that Human Capital Theory (Becker, 1962) does 
in fact predict that tuition increases will be likelier to dissuade older students than younger ones 
from study because older ones have less time in which to make back their investments through 
higher earnings. To the extent that part-time students are older than full-time ones,38 this might 
therefore  to  be  expected.  In  addition,  part-time  students  were  not  eligible  for  any  study  aid  to 
offset  their  tuition  prior  to  2012.  On  the  other  hand,  these  figures  are  percentages,  and  the 

37 Here, part-time includes students recorded as studying part-time, or studying full-time on courses lasting less than 
24 weeks, on block release, or studying during the evenings only. (see definition by HESA, available at: 
http://www.hesa.ac.uk/content/view/1902/#mode) 
38 In 2008 (the most recent year of data freely available), 64% of first-year part-time undergraduates were over 30. 

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denominator  here  includes  both  full-and  part-time  students.  In  absolute  terms,  there  were  only 
30,000  fewer  part-time  students  in  2011  than  there  were  in  2001;  what  caused  the  percentage 
drop was mainly the addition of roughly 350,000 students on the full-time side. 

Figure 3.2: Part-time students as a percentage of total headcount (1995-2011) 

45%

40%

35%

30%

25%

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Source: Higher Education Statistics Agency. 

3.3  Enrolment Composition  

Another  possible  avenue  through  which  institutions  might  choose  to  increase  revenue  is  by 
attracting  international  students,  who  may  be  charged  fees  for  full-time  studies  in  ways  that 
domestic students cannot. 

Universities  in  England  have  been  permitted  to  charge  full  fees  to  international  students  since 
1981.  As  was  noted  earlier,  even  when  tuition  was  free  for  domestic  students,  fees  made  up  a 
significant  portion  of  the  higher  education  budget,  and  these  for  the  most  part  came  from 
international  students.  The  arrival  of  fees  for  domestic  students  should  not  have  changed  the 
equation for international students too much as they continued to be significantly more valuable 
to universities than domestic students. As Figure 3.3 shows, the proportion of the student body 
coming from outside the EU rose steadily from about 12% in 1994 to 17% in 2011. 

Another  factor  to  consider  from  about  2004  onwards  is  the  increasing  influence  of  university 
rankings  and,  in  particular,  the  rise  of  Global  Rankings  such  as  the  Times  Higher  Education, 
which awarded  points  based  on the proportion  of  international  students  an  institution  enrolled. 
The quest for international students may thus have been as much about prestige as about income. 

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Figure 3.3: International student enrolment as a percentage of total headcount 
(1995-2011) 

20%

15%

10%

5%

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Note: Data for all UK countries. 
Source: Higher Education Statistics Agency 

Of note is the fact that tuition for international students increased fairly steadily throughout this 
period.  Authorities  in  England  do  not  track  international  student  tuition  directly;  however, 
dividing the total amount of fees earned from international students can give one an average fee 
paid  per  international  student,  though  by  necessity  this  eliminates  the  distinction  between 
undergraduate and graduate fees. The evolution of fees is shown in Figure 3.4. 

Figure 3.4: Average international student fees in 2011 pounds (1995-2011)  

12 000

11 000

10 000

9 000

8 000

7 000

6 000

5 000

4 000

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Note: this includes fees for both undergraduate and graduate students. 
Source: Higher Education Statistics Agency. 

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3.4  Diversity of Provision  

Another  hypothesis  regarding  the  effects  of  cost-sharing  is  an  increase  in  the  diversity  of 
provision, either in the number of institutions or the number of programmes offered.  Figure 3.5 
shows the number of universities in England from 1995 to 2011. The decline in the number in 
the  1990s  is  largely  due  to  institutional  mergers  which  occurred  in  the  wake  of  the  mass 
conversion  of  former  polytechnics  in  1992.  Since  then,  the  number  has  stayed  fairly  constant, 
settling  at  130  in  2011.  Since  then  (not  shown  on  the  graph),  two  private  institutions  –  the 
University  of  Law  and  BPP  Universities  –  have  been  granted  the  right  to  use  the  term 
‘university’.  

Figure 3.5: Number of universities in England (1995-2011) 

144
142
140
138
136
134
132
130
128
126
124

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Source: Higher Education Statistics Agency. 

There is no reason to link the decline in numbers in the 1990s with changes in fee policy as the 
decline  started  well  before  the  Dearing  Commission.  The  introduction  of  two  new  private 
universities  in  2012-3  is,  however,  quite  clearly  part  of  a  government’s  plan  to  try  to  open  up 
provision  of  higher  education  to  the  private  sector.  The  present  Government’s  current  white 
paper  makes  it  relatively  clear  that  the  elimination  of  public  funding  for  many  fields  of  study 
(and  the  concomitant  rise  of  fees)  is  about  ‘levelling  the  playing  field’  for  public  and  private 
providers. 

Figure  3.6  shows  the  number  of  undergraduate  degree  programmes  offered  in  England  from 
1994  to  2011.  Apart  from  a  one-year  spike  in  1996/97  (cause  unknown),  the  total  number  of 
degree  programmes  rose  slowly  but  steadily  from  30,000  to  40,000  between  1994  and  2004, 
where  it  plateaued  for  four  years.  At  about  the  time  of  the  financial  crisis,  when  it  became 
evident that the sector’s funding would not continue increasing indefinitely, there  was a strong 
push to  rationalise  programme  offerings  and  reduce  them  in areas  where  enrolments  were  low 
enough to be thought unsustainable. By 2011/12, the number of programmes had been reduced to 
35,000. 

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Figure 3.6: Number of first degree programmes offered (1994/95-2011/12) 

45 000

40 000

35 000

30 000

25 000

20 000

5
9
9
1
/
4
9
9
1

6
9
9
1
/
5
9
9
1

7
9
9
1
/
6
9
9
1

8
9
9
1
/
7
9
9
1

9
9
9
1
/
8
9
9
1

0
0
0
2
/
9
9
9
1

1
0
/
0
0
0
2

2
0
/
1
0
0
2

3
0
/
2
0
0
2

4
0
/
3
0
0
2

5
0
/
4
0
0
2

6
0
/
5
0
0
2

7
0
/
6
0
0
2

8
0
/
7
0
0
2

9
0
/
8
0
0
2

0
1
/
9
0
0
2

1
1
/
0
1
0
2

2
1
/
1
1
0
2

Source: Higher Education Statistics Agency. 

3.5  “Outreach” Practices  

One significant change in outreach practices in the United Kingdom has been the spread of US-
style marketing, particularly in the run-up to the major changes in 2012. Though there are little 
long-term data about marketing budgets, we know that marketing budgets increased by just over 
30%  between  2009  and  2013,  from  19  pounds  per  applicant  to  25  pounds  per  applicant 
(O’Reilly,  2013).  A  survey  conducted  by  the  Times  Higher  Education  Supplement  in  2012 
(Matthews,  2013)  suggested  that  institutions  averaged  about  450,000  pounds  in  marketing 
expenditures  in  the  2011-12  recruitment  cycle;  however,  these  figures  vary  widely  between 
institutions. At the top end of the prestige scale, Oxford and Cambridge spent nothing, while the 
London Business School spent almost 2% of its total budget on marketing (Matthews, 2012) (for 
reference,  US  private  for-profit  institutions  spend  about  20%  of  their  income  on  marketing); 
however,  apart  from  these  extremes  the  study  found  little  to  substantially  inversely  correlate 
spending with prestige. 

Without comparative data from earlier tuition fee changes, it is not entirely clear what meaning 
one can draw from this. Twenty-five pounds per applicant is still not very much, and is certainly 
lower than comparable institutions in the US would spend (even public institutions, which charge 
considerably  less  than  the  UK  institutions  now  charge)39.  Still,  it  would  seem  to  be  clear 
evidence  that  institutions  are  changing  their  behaviour  to  attract  more  students,  even  if  this 
expenditure does not in any way change the actual student experience. 

39 The average across average published tuition fees at public HEIs of all states for four-year courses was 8,521 US-
dollars (roughly 6,150 euros) in 2012/2013 according to CollegeBoard US (http://trends.collegeboard.org/college-
pricing/figures-tables/tuition-and-fees-sector-and-state-over-time). 

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More  evidence  from  along  these  lines  comes  from  the  ‘clearing’  experience.  ‘Clearing’  is  a 
uniquely  UK  process  which  bears  some  explanation.  Students  apply  to  universities  through  a 
centralised clearing service  known as the University and College Application Service (UCAS). 
Not  all  students  are  accepted  to  any  of  their  preferred  universities  in  the  spring  application 
period; equally, many institutions have unfilled places come the summer. ‘Clearing’ is a process 
that  matches  un-selected  students  with  institutions  with  unfilled  places.  Traditionally,  clearing 
was seen as something in which only second- and third-tier universities would participate as the 
pool  of  students  in  clearing  were  not  seen  as  being  of  sufficiently  high  quality  as  to  be  worth 
bothering to recruit. However, post 2012 rule changes not only made students more valuable in 
terms of the fees they bring in, but some students (those with particularly high A-level marks) 
effectively  counted  double  because  they  could  be  accepted  without  their  counting  against  the 
enrolment cap. While most students of this calibre would have been selected in the spring base 
on  their  expected  A-level  results,  a  few  who  did  much  better  than  expected  might  still  be 
available come clearing time. The result was that the number of institutions participating in this 
process  jumped  from  24  to  124,  including  many  of  the  selective  Russell  Group  universities. 
Clearly, this was the result of changed behaviour due to fee policy changes - however, they were 
due not solely to rules about fees but also rules about student caps (that is to say, they were as 
much about a reaction to the quasi-market as to the market). 

3.6  Quality and Relevance  

Unlike many countries in our survey, there are a number of measures about educational quality 
and relevance that may be used to evaluate the impact of cost-sharing. This section begins with 
the views of students themselves. Since 2005 – just before the introduction of the second major 
fee  reform  –  English  universities  have  been  conducting  a  survey  called  the  National  Student 
Survey,  which  is  meant  to  measure  the  quality  of  services  provided  on  campus  as  well  as  the 
degree  of  student  engagement.  This  is  useful  because  it  means  there  are  data  from  all  three 
tuition regimes (the post-Dearing, post 2006 and post-Browne eras). Since 2006, it has also been 
administered across Scotland as well.40 This allows us to use Scotland as something of a control 
group.  Figure  3.7  shows  the  percentage  of  students  in  each  country  reporting  that  they  either 
‘definitely’ or ‘mostly’ agreed with the statement ‘overall, I am satisfied with the quality of my 
course’. 

40 In point of fact, it was administered at two Scottish universities in 2005 as well, but their results are excluded here 
because of non-representativeness. 

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Figure 3.7: Percentage of students indicating agreement with statement 
‘Overall, I am satisfied with the quality of my course’ 

87
86
85
84
83
82
81
80
79
78
77

2005

2006

2007

2008

2009

2010

2011

2012

2013

England

Scotland

Note: Percentage includes respondents reporting that they either ‘definitely’ or ‘mostly’ agreed.  
Source: National Student Survey. 

Throughout  the  period  in  question,  satisfaction  among  Scotish  students  is  higher  than  that  for 
English  students,  which  might  suggest  that  lower  fees  make  students  happy.  But  what  is 
particularly  intersesting  about  the  results  in  figure  3.7  is  the  way  in  which  English  results 
continue  to  improve  throughout  the  period,  even  though  average  tuition  fees  rose  more  than 
twelvefold in real terms. It is not entirely clear how one should interpret this result, but it may be 
that  English  universities  have  been  making  efforts  to  improve  the  student  experience  over  the 
past eight years and these efforts have borne at least some fruit. 

There  is  less  information  with  respect  to  employers.  Though  there  are  employer  satisfaction 
surveys carried out by Ipsos-MORI on behalf of the Confederation of British Industry (note the 
survey is a UK survey, and not an English one), they have not been going on for long enough to 
really understand how fees might have changed employers views. Table 3.1, below, shows how a 
selection of industry respondents (the numbers vary between 540 and 700) rate graduates skills 
in a variety of areas. The percentages shown in the boxes indicate the proportion of employers 
saying  they  were  ‘very  satisfied’  or  ‘satisfied’  with  the  skills  graduates  possess.  To  the  extent 
that there is a trend in these findings, it is downward; that is, industry is expressing  decreasing 
satisfaction  with  graduates,  notably  in  problem-solving,  team-work,  self-management  and 
customer awareness. However, most of the drop happened in a single year, 2010, with very little 
change thereafter. It is unclear why this should be the case. 

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Table 3.1: Proportion of employers reporting they are ‘satisfied’ or ‘very 
satisfied’ with graduate skill  

2009 

2010 

2011 

2012 

IT Skills 

Numeracy Skills 

Positive Attitude 

Use of English/ Communication 

Problem Solving 

Team-work 

Self-Management 

Work Experience 

International /Cultural awareness 

Customer awareness 

98 

92 

87 

89 

90 

80 

65 

91 

91 

80 

86 

76 

81 

74 

61 

60 

54 

95 

90 

85 

83 

81 

80 

75 

58 

57 

56 

94 

90 

82 

85 

77 

75 

69 

63 

59 

53 

Foreign Language Skills 
Note:  Percentages  indicate  the  proportion  of  employers  saying  they  were  ‘very  satisfied’  or  ‘satisfied’  with  the 
skills graduates possess. 
Source: Ipsose-Mori/CBI. 

40 

46 

44 

3.7  Evaluation 

The broad hypothesis which was tested in this section was ‘have institutional strategies changed 
to maximise revenue from private sources’. This has been done by looking at six sub-hypotheses, 
which  will  be  briefly  reviewed  here  before  attempting  to  assess  whether  there  was  an  overall 
effect. 

The first sub-hypothesis related to whether the discipline profile of HEIs in the country changed 
(e.g., increasing offers in paper-and-pencil subjects and fewer provisions in expensive lab-based 
areas, or focus on more popular subjects). The answer here is essentially no. Despite a massive 
increase in student numbers and massive changes in tuition policy, they stayed spread across a 
wide variety of disciplines. The share for engineering was the only one to drop significantly, but 
science was one of the disciplines that gained share.  

The second sub-hypothesis related to whether there had been any change in the modes of study, 
such  as  an  increase  in  part-time  provision,  with  the  aim  of  increasing  private  revenue.  Here, 
judgement is somewhat more difficult. Part-time enrolments first rose then fell over our period, 
despite fees only moving in one direction. They fell sharply as a proportion of total enrolments 
after 2006, though this was due more to an increase in the number of full-time students than a 
decrease  in  the  number  of  part-timers.  The  fall  after  2006  may  have  been  due  to  a  significant 
increase in costs without any concomitant ability to borrow; if so, we may see a reversal of this 
trend after 2012, as these students are now permitted to access study aid. 

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The  third  sub-hypothesis  has  to  do  with  institutions  changing  their  enrolment  composition  to 
maximise  revenue,  such  as  by  recruiting  more  international  (non-domestic)  students  paying 
international  student  fees.  Here  the  answer  is  pretty  clear:  English  universities  have  long  been 
aggressive  about  courting  fee-paying  international  students.  Changes  to  domestic  tuition  fee 
schedules have not altered this at all, and even as overall enrolments grew, the proportion of the 
student body coming from outside the EU grew even faster, and the fees international students 
were charged rose faster still. 

The fourth sub-hypothesis relates to any change that had occurred in the degree of diversity in 
higher  education  providers,  such  as  more  private  institutions,  or  more  programmes  offered  by 
public institutions. Here the answer is mixed. A very small private sector has come into existence 
but it is too soon to evaluate its effects on overall provision. The number of public institutions 
declined, but this was due more to consolidation after the major reform of 1992 than anything to 
do with tuition. The number of programmes at public universities rose and then fell, but the fall 
was fairly clearly due to anticipated declines in overall funding.  

The  fifth  sub-hypothesis  had  to  do  with  institutions  becoming  more  open-access  and  market-
focused  in  order  to  chase  income.  There  is  some  evidence  of  this  with  respect  to  increasing 
marketing budgets and increased popularity among institutions in the clearing process. 

The  sixth  and  final  sub-hypothesis  has  to  do  with  quality  and  relevance.  Did  students  and 
graduates  become  more  satisfied  with  the  options  available  to  them?  Did  graduates  become 
satisfied with their employment outcomes? And were employers satisfied with quality of recent 
graduates?  There  are  quite  a  bit  of data  concerning  this  question.  With  respect to  students,  we 
can see that after the 2006 reform and continuing until after the 2012 reform, the percentage of 
students  indicating  satisfaction  with  their  courses  slowly  but  steadily  increased  while  – 
intriguingly – those of students in Scotland remained constant (albeit at a slightly higher level). 
With respect to employers, only a fairly brief time series is available so it is difficult to see many 
effects  from  cost-sharing.  Looking  at  the  data  which  are  available,  however,  employer 
satisfaction levels seem generally high, though they are falling in specific areas such as problem-
solving, self-management and customer awareness. 

And  so,  to  the  summative  question:  have  institutional  strategies  changed  to  maximise  revenue 
from private sources? The answer to this is almost certainly yes, with very few qualifications. 

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4.  HYPOTHESIS C: INCREASING PRIVATE FUNDING HAS 

A NEGATIVE EFFECT ON PARTICIPATION 

This  chapter  looks  at  data  relevant  to  Hypothesis  C,  which  states  that  as  private  funding 
increases,  costs  increase  to  students  and  their  families,  which  in  turn  may  have  an  impact  on 
quantitative student demand and on the composition of the student body.  

In order to assess this, it is important to look at:  

 

the real costs to students, including direct and indirect support provided by the state, which 
may discount the gross costs 

  how tuition fees are organised: Who pays and who does not pay? When do you pay – as a 

 

student or as a ‘successful’ graduate (with a well-earning job)? 
the  overall  trend  of  participation  rates  in  the  country  in  question,  i.e.  expanding,  stable  or 
contracting? 

4.1  Students’ Costs for Higher Education  

Prior  to  1997,  tuition  at  English  universities  was  free  for  domestic  undergraduate  students. 
Following the publication of the Dearing Report, fees were raised to 1000 pounds, with partial 
fee  waivers  available  for  students  from  families  earning  less  than  30,000  pounds  p.a.  and  full 
ones for students from families earning less than 20,000 pounds p.a. After 2006, maximum fees 
went  up  to 3,000 pounds  p.a.  (and  thereafter  adjusted  for  inflation);  most  institutions took  full 
advantage  of  the  freedom  to  set  fees  and  set  fees  at  the  maximum.  In  2012,  after  the  Browne 
Report,  maximum  tuition  rose  to  9,000  pounds  and  as  in  2006,  many  institutions  took  full 
advantage  to  raise  fees  as  far  as  possible.  Seemingly  taken  aback  by  the  fact  that  so  few 
institutions tried to compete on price, the government belatedly created incentives for institutions 
to keep prices below 7,000 pounds which some chose to take up. As a result, the final average 
tuition fee for 2012-3 was roughly 8,400 pounds. Part-time fees, since the 2006 report, have been 
roughly half those of the full-time fee – see Figure 4.1. 

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Figure 4.1: Student fees over time (1995-2012) 

10 000
9 000
8 000
7 000
6 000
5 000
4 000
3 000
2 000
1 000
0

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Average fee paid (FT)

Maximum Fee (FT)

Average fee paid (PT)

Maximum Fee (PT)

Source: Student Loan Company and Parliamentary Briefing Papers. 

Of course, tuition is not the only source of costs in higher education. Regular surveys conducted 
as  part  of  the  EUROSTUDENT  programme  can  help  to  highlight  changes  in  such  costs  over 
time. We can see from Table 4.1 that students in England41 faced a substantial escalation in non-
tuition costs over the thirteen years from 1998, primarily from the cost of housing. 

Table 4.1: Student living expenses, in 2011 pounds (1998/99-2011/12) 

Full-time 

Part-time 

Participation, 
books, child care 
and transportation 

Housing 

Living 

Participation, 
books, child care 
and 
transportation 

Housing 

Living 

1998-99* 

2002-03† 

2004-05 

2007-08 

1,172 

1,204 

2,416 

3,599 

1,936 

1,606 

2,778 

2,804 

6,189 

5,837 

7,164 

7,420 

1,792 

2,985 

8,421 

n/a 

n/a 

1,970 

2,159 

3,712 

3,721 

n/a 

11,052 

12,019 

3,973 

2011-12 
Note: *1998/99 includes all students not just English domiciled; other years restricted to English domiciled;  
†2002/03 covered only full-time single childless students under 25 in England and Wales; full sample used in later 
years. 
Source: UK Student income and expenditure surveys. 

3,995 

6,705 

3,002 

2,420 

11,534 

41 Technically, this survey covers England and Wales. The 2002 sample covered only full-time students under the 
age of 25; other years covered the entire student population. 

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It is sometimes asserted that higher tuition fees will encourage students to work and as a result 
possibly  neglect  their  studies.  This  does  not  appear  to  be  the  case  in  England,  where  the 
percentage of students working actually decreased somewhat over time. Employment outcomes 
are  shown  in  Table  4.2.  Earnings,  however,  have  increased  substantially  over  time,  which 
suggests that hours worked have increased. Hence, though fewer students may be working, those 
that choose to do so may be working longer hours.  

Table 4.2 Select statistics on student employment, in 2011 pounds (1998-2011, 
various years) 

Average annual earnings (in £2011) 

% of total income 

% of students working 

1998 

2004 

2007 

898 

2,222 

2,408 

2011 
Source: UK Student Income and Expenditure Surveys. 

1,662 

12 

22 

20 

15 

62% 

56% 

53% 

52% 

Grants 

Currently in England, there are only  two types of grant  – those for maintenance (means-tested 
awards  for  living  expenses),  and  those  for  students  with  disabilities.  The  precursor  of  the 
maintenance grant was called ‘Higher Education Grant’ (2004/05-2005/06). It awarded students 
of up to 1,000 pounds to help defray the costs of participation. Grants are non-taxable income. 

Because of the significant changes in programmes and reporting over the years, we do not have a 
full picture of grants prior to 2005 (mainly because recipient numbers are missing). However, as 
Figure 4.2 shows, average  grant size stayed comparatively constant between 2005 and 2011 in 
real  terms,  staying  within  a  small  band around 2,400 pounds.  The  number  of  grants,  however, 
increased  quickly  following  the  re-introduction  of  maintenance  grants  in  2006,  and  rose  from 
around  400,000  (about  35%  of  students)  in  the  last  year  of  the  post-Dearing  tuition  phase,  to 
about 650,000 (about 46 % of students) in 2010 and then back down again to 600,000 in 2011 
(about 40 % of students).  

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Figure 4.2: Number and average size of grants over time (2005-2011) 

750

700

650

600

550

500

450

400

350

300

250

s
d
n
a
s
u
o
h
t
n

i
s
t
n
a
r
g
f
o
r
e
b
m
u
N

2 800

2 600

2 400

2 200

2 000

1 800

1 600

1 400

1 200

1 000

s
d
n
u
o
p
n

i

e
z
i
s
t
n
a
r
g
e
g
a
r
e
v
A

2005

2006

2007

2008

2009

2010

2011

Grants

Avg grant

Source: Student Loan Company. 

Loans 

Student loans were first offered in England in 1992, and were designed to cover part of living or 
‘maintenance’  costs.  After  the  introduction  of  fees  in  1998,  maintenance  became  an  entirely 
loan-based  affair.  In  2006,  when  higher  fees  were  introduced,  a  new  ‘Tuition  Fee  Loan’  was 
introduced. Unlike the maintenance loan, it was universal rather than need-based, thus permitting 
the government to say that education remained ‘free at the point of delivery’ because universal 
availability  meant  that  no  students  would  have  to  pay  a  cent  out  of  his  or  her  pocket.  Due  to 
changes in reporting, it has not been possible to obtain a consistent sample of the maintenance 
loans before 2001. Such data as are available are presented below in Figure 4.3 

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Figure 4.3: Number and average size of loans over time (2001-2011) 

s
d
n
a
s
u
o
h
t
n

i
s
n
a
o

l

f
o
r
e
b
m
u
N

950

850

750

650

550

450

350

250

4 500

4 000

3 500

3 000

2 500

2 000

s
d
n
u
o
p
n

i

n
a
o

l

e
g
a
r
e
v
A

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

# of Loans (Fees)

Avg loan (fees)

# of Loans (Maintenance)

Avg loan (maintenance)

Source: Student Loans Company. 

Tax Expenditures 

The UK has only one small form of tax-based assistance for students; namely, a tax exemption 
for income from scholarships. Since this income is taxable in the year it is used and students do 
tend not to earn very much money, the value of this tax exemption is relatively low, and we do 
not include it in our calculations of net cost in this report. 

Student Debt 

Until comparatively  recently,  there  were  no  ‘official’  figures  for  student  debt  at  completion  of 
studies. It was known, for instance, that between 80% and 90% of graduates held debt, but the 
actual consolidated amount was not known. Different banks – first Barclay’s and then Natwest – 
conducted  regular  surveys  of  graduates,  with  somewhat differing  results. Only  in  2006 did  the 
Student  Loan  Company  begin  publishing  its  own  annual  estimates  of  consolidated  debt.  As 
shown in Figure 4.4, debt rose steadily even before the introduction of fees in 1998. From there 
until 2006 debt rose steadily before levelling off at just above 20,000 pounds. 

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Figure 4.4: Estimated average debt of graduates over time, in 2011 pounds 
(1994-2011) 

25 000

20 000

15 000

10 000

5 000

0

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Barclay's

Natwest

SLC Projection

Source: Student Loan Company; Barclay’s Bank Survey; Natwest Bank Survey. 

Net Costs 

In this section net costs are defined as average tuition fees minus average subsidies (i.e. grants 
and  loans).  Figure  4.5  looks  at  average  fees  paid,  net  fees  (i.e.,  average  fees  minus  average 
grants42) and net fees after loans. At the start of the period for which data are available (2001), 
the  average  fee  in  constant  2011  pounds  was  just  under  800  pounds.  Grants  were  relatively 
scarce and so only brought down the net fee by about 200 pounds. Loans, however, were over 
2,500 pounds, and so the average student was able to cover fees and have roughly 2,000 pounds 
left over for their living expenses. There was, obviously, a significant one-time change in costs 
when  the  2006  tuition-fee  regime  changed.  On  a  net  fee-basis,  this  was  partially  offset  by  an 
increase in average grants, which rose to about 1000 pounds per student and so reduced net cost 
by about a third. But with an even larger increase in the size of average loans, the out-of-pocket 
cost (that is, net fees minus loans) actually remained virtually unchanged at minus 2,000 pounds. 
At a day-to-day level, then, the reforms did not leave English students out of pocket at the time 
they were studying – the consequence of this, though, was much higher debt. 

42 Average grants equal total grants divided by the number of full-time students; since not all students receive grants, 
this figure will be lower than net cost for students who did not receive a grant, and higher than net cost for those 
who did. The Loan average is similarly distributed across all students rather than just those with loans, though since 
over 80% of students receive loans in any given year, this number is much closer to what students who were 
awarded loans actually received. 

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Figure 4.5: Net fees, in 2011 pounds (2001-2011) 

4 000

3 000

2 000

1 000

0

-1 000

-2 000

-3 000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Fees

Net Fees

Net Fees After Loans

Note: Net student fees is student fees minus grants. 
Source: Student Loans Company. 

There are no statistics yet that would permit to see the full effects of the 2012 changes. It is clear 
that average tuition rose by roughly 4,500 pounds to just under 8000 pounds. If the remainder of 
the changes occurred as expected, we would expect net tuition to increase by an equivalent 4,500 
pounds,  because  the  tuition  increase  was  not  accompanied  by  an  increase  in  grants.  However, 
because  the  tuition  increase  was  accompanied  by  an  equivalent  increase  in  loans,  one  would 
expect that net tuition minus loans would not change substantially even after the reform: but that 
debt levels will rise even further. 

Relative Earnings 

One important factor to consider is how relative earnings of graduates have changed over time. If 
rising  costs  are  accompanied  by  rising  graduate  earnings  then  the  latter  should  to  some  extent 
offset the former in terms of the return on investment. Figure 4.6 shows the evolution of higher 
education earnings premiums over time. 

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Figure 4.6: Relative earnings of higher education graduates (1997–2011)  

168
166
164
162
160
158
156
154
152
150
148
146

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Note: Indexed to the earnings of a person with upper secondary or post-secondary non-tertiary education (=100). 
Source: OECD. 

Figure 4.7 shows that returns changed relatively  little over the period in question. Since actual 
net cost increased roughly five-fold (albeit from quite a low base) over the decade in question, it 
must be the case that the financial advantage potential students can expect from pursuing higher 
education  has  in  fact  been  falling.  This  might  be  expected  to  make  higher  education  less 
attractive as an investment and to have had a negative impact on enrolment. The fact that it has 
not suggests that in fact demand still significantly exceeds supply in English higher education.  

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Figure 4.7: Relative earnings of higher education graduates vs. net costs of 
higher education (2001-2011) 

i

m
u
m
e
r
p
s
g
n
n
r
a
E

i

168

166

164

162

160

158

156

154

152

150

148

2 500

2 000

1 500

1 000

500

0

s
d
n
u
o
p
n

i

t
s
o
c
t
e
N

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Earnings premium

Net Cost

Note: Relative earnings Indexed to the earnings of a person with upper secondary or post-secondary non-tertiary 
education (=100). 
Source: OECD, Student Loans Company, Authors’ Calculations. 

4.2  Participation Rates  

A key question to address in this research is whether changes in cost-sharing have had an impact 
on transition rates from secondary education and on overall participation rates. 

If we simply answer the question with reference to participation rates, the data available on this 
needs some careful interpretation, because the answer differs by age range. Normally, when we 
talk about participation rates, we talk about the rates among ‘traditional’ age students. In these 
case studies, a ‘best 4 years’ approach has been used, which looks at rates in the four years with 
the  highest  student  participation  rates.  Here,  the  evidence  is  unequivocal  that  rapidly  rising 
tuition rates have had no detectable effect on access. Indeed; quite the opposite  – following the 
2006 tuition fee rise, when institutions suddenly had access to much more money, they expanded 
places and participation rates rose. The same should not be expected of the 2012 fee rise, as the 
government has explicitly limited the number of places available; until that policy changes, any 
increase in participation rates post-2012 are going to come from declines in the youth population 
base rather than increases in student numbers.43 

43 According to the 2011 census, the 20-24 age band in England had 3.59 million people, the 15-19 band 3.34 
million and the 10-14 band 3.08 million. This means that provided domestic student numbers stay stable, the 
participation rate will increase significantly 

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Figure 4.8: Participation vs. various cost indices, in 2011 pounds (2001-2011) 

4000

3000

2000

1000

0

-1000

-2000

-3000

34%

32%

30%

28%

26%

24%

22%

20%

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Fees

Net Fees

Net Fees After Loans

Participation rate

Source: Higher Education Statistics Agency, Student Loans Company. 

Figure 4.8 suggests that even major tuition fee increases have had no effect on participation rates 
of traditional age students. But this is not entirely the case, as a closer examination of the more 
recent (and much larger) tuition-fee increase shows. Participation rates can be slow to change in 
the face of sudden policy changes because they contain data on several cohorts simultaneously. 
A more sensitive look at demand would look directly at applications from new students.  This is 
shown below in Figure 4.9. In fact, applications fell across the UK in  2012. As expected, they 
fell by the most in England (9%), but they also fell in Scotland (2%) and in Wales (0.5%). This 
suggests  that  the  introduction  of  tuition  fees  did  in  fact  have  an  effect  on  demand.  That  said, 
preliminary  data  from  UCAS  for  the  2012  reporting  period  suggest  that  applications  have 
rebounded somewhat, rising 3% in England. 

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Figure 4.9: University application rates, indexed to 2007 (2007-2012) 

140

130

120

110

100

90

80

2007

2008

2009

2010

2011

2012

England

Wales

Scotland

Source: Universities and Colleges Admission Service. 

It is important to point out, though, that these reductions in demand were not equally distributed 
across age groups, as is shown in Figure 4.10. It was of some interest that ‘traditional’ entry-aged 
students – that is 18 year-olds, only recorded a 2% drop in applications in 2012; among older age 
groups, the decline was between 6-10%. The most precipitous and worrying drops were among 
19  and  20  year-olds.  Among  older  students,  the  decline  in  applications  in  2012  was  slightly 
milder, and was actually part of a larger trend that began in 2010. These were the age groups that 
seemingly  benefitted  the  most  from  the  post-2006  expansion  of  access  (applications  for  30-39 
year-olds  grew  by  30%  between  2007  and  2009),  so  even  after  three  years  of  decline,  their 
application numbers were still substantially above where they had been in 2007. 

Figure 4.10: University application rates by age, indexed to 2007 (2007-2012) 

140

130

120

110

100

90

80

2007

18

2008

19

2009

20

2010

2011

21-24

25 to 29

2012

30 to 39

Source: Universities and Colleges Admission Services. 

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Another  important  piece  of  evidence  concerns  people  who  do  not  attend  higher  education  and 
their reasons for not doing so; it may well be that some important effects show up in terms of the 
percentage of students who say they are excluded involuntarily, or an increase in the number of 
young people with no interest in attending higher education. There is one interesting time series 
on  this,  thanks  to  the  Sutton  Trust,  which  conducted  a  series  of  surveys  of  11-16  year-olds, 
asking them about higher education. These results are shown in Table 4.3. The percentage who 
said they  were somewhat or very unlikely to attend higher education fell  from 14 to 7 percent 
between 2003 and 2010, which suggests again that the 2006 reform did not act as a deterrent to 
young  people.  Among  those  who  did  indicate  that  it  was  unlikely  they  would  attend  higher 
education,  we  do  not  see  many  important,  sustained  trends  in  the  reasons  for  why  they  are 
unlikely to go to university. Wanting to do something practical and wanting to make money are 
the  two  most  common  responses  across  the  entire  period.  The  percentage  saying  they  were 
worried about going into debt did rise somewhat, but it is clear that finances were not a major 
factor in students thinking it unlikely they would attend university. 

Table 4.3 Reasons for not planning to attend higher education, 11-16 year olds 
(2003-2010) 

Percent claiming to be unlikely to go 
into HE 

14% 

12%  

12%  

9%  

12%  

9%  

7%  

2003 

2004 

2005 

2006 

2007 

2008 

2010 

Of those who claim to be unlikely to go to HE, % who agree with each statement below: 

I prefer to do something practical 
rather than studying from books. 

I want to start earning money. 

I'm not clever enough. 

I can get a well-paid job without a 
degree. 

I won't get good enough exam 
results to get in. 

I don't know enough about it. 

I do not need a degree for the job(s) 
I am considering. 

I do not enjoy learning. 

I'm worried about getting into debt 
as a student. 

My family can't afford to pay for me 
to be a student. 
Source: Sutton Trust. 

39 

40 

28 

31 

29 

16 

32 

29 

14 

9 

49 

40 

25 

25 

29 

15 

25 

31 

18 

7 

45 

48 

26 

35 

26 

15 

30 

29 

17 

10 

48 

43 

32 

30 

31 

16 

21 

32 

15 

7 

52 

49 

29 

34 

24 

16 

27 

30 

20 

11 

52 

50 

22 

30 

20 

16 

25 

25 

13 

7 

45 

45 

38 

33 

31 

25 

25 

24 

20 

13 

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4.3  Composition of the Student Body  

Of course, the issue of accessibility cannot be measured by aggregate numbers alone. Increasing 
the  share  of  private  funding  may  affect  the  composition  of  the  student  body,  by  changing 
participation  by  age,  gender,  socio-economic  status,  or  other  under-represented  groups.  These 
possibilities are examined in the sections that follow.  

Gender 

Though there is gender inequality in higher education in England and the UK (as in most of the 
OECD,  females  outnumber  males  substantially),  there  is  little  indication  that  tuition  fees  have 
had  any  influence  on  this.  Figure  4.11  shows  the  percentage  of  males  and  females  aged  18 
applying  for  university  places  from  2004  to  2012,  thus  covering  both  the  major  tuition  fee 
increase  incidents.  The  gap  between  female  and  male  entry  rates  stayed  constant  at  seven 
percentage points throughout the period; the gap in application rates actually grew slightly, from 
seven to ten points between 2004 and 2007. In both 2005-6 and 2011-12 we see a similar pattern 
across all four categories – a rise in the year prior to the tuition increase followed by a drop the 
year of the change. But the effect is the same regardless of gender.  

Figure 4.11: University application and entry rates by gender, indexed to 2007 
(2004-2012) 

45%

40%

35%

30%

25%

20%

15%

2004

2005

2006

2007

2008

2009

2010

2011

2012

Male applications

Female Applications

Male Entry

Female Entry

Source: Universities and Colleges Admissions Service. 

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Socio-Economic Status 

Since the introduction of tuition fees, there has been considerable effort expended in collecting 
data on participation from students from low-income backgrounds in England and throughout the 
UK. The most consistent measure is the data collected by the Higher Education Statistics Agency 
on the percentage of the student body that comes from lower social classes.  

Before discussing the data, it is worth noting how the data are collected and what it means. When 
students apply for higher education, they are asked on their forms about parental occupation and 
ethnicity.  As  a  result,  it  is  possible  to  answer  questions  at  any  given  time  such  as  ‘what 
percentage of the student body is from lower social classes’? What it is not possible to do  – at 
least  not  without  considerable  manipulation  of  census  data  which  is  beyond  the  scope  of  this 
exercise - is to look at participation rates from each social class. This is because we do not know 
the size of the underlying population (e.g. total number of children whose parents  are in lower-
supervisory  or  technical  occupations),  and  hence  cannot  produce  the  denominator  required  to 
create a true rate. 

Figure 4.12 shows the proportion of new entrants to higher education which comes from the four 
lowest classes on the National Statistics – Socio-Economic Classification. Small employers and 
own  account  workers  (Class  4),  lower  supervisory  and  technical  occupations  (Class  5),  semi-
routine occupations (Class 6), and routine occupations (Class 7). These groups are considered the 
‘traditionally under-represented’ in UK higher education. 

Figure 4.12: Proportion of new entrants from four lowest socio-economic groups 
(2002-2011) 

35%

30%

25%

20%

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Note: Data for all UK countries. 
Source: Higher Education Statistics Agency. 

Clearly,  the  data  shown  in  Figure  4.12  are  somewhat  prone  to  swings,  but  the  overall  trend 
shown  is  unmistakable  –  even  as  total  student  numbers  have  increased  significantly,  an 
increasing share of enrolments is from students who are from underrepresented  groups. This is 
not  incontrovertible  evidence  of  improving  access  –  conceivably,  the  proportion  of  all  young 
people  coming  from  under-represented  social  classes  might  be  increasing  as  well.  But  it  is 
likelier than not that it implies an improvement in access, despite an increase in tuition fees over 

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this  period  from  0-500  pounds  (most  students  from  these  backgrounds  would  have  benefitted 
from fee waivers in the pre-2005 period) to 3000 pounds. 

Unfortunately, the data shown in Figure 4.12 only go up to 2011, and so do not show the impact 
of the 2012 tuition fee change. However, a different set of data, collected by the University and 
College  Application  Service  (UCAS),  suggests  something  similar.  UCAS  routinely  publishes 
application  rates  by  income  quintile.  Application  rates  are  of  course  not  access  rates  –  some 
people  who  apply  are  not  accepted.  But  they  are  an  indicator  of  demand  and  if  tuition  were 
deterring participation it would do so by dampening demand and hence diminishing the number 
of applications. These data are shown below in Figure 4.13. 

Figure 4.13: Application rates from the lowest income quintile, England, Wales 
and Scotland (2007-2013)  

Source: Universities and Colleges Application Service. 

Figure  4.13  shows  two  things.  First,  that  application  rates  from  the  lowest  quintile  were 
significantly  higher  in  England  than  they  were  in  neighbouring  Scotland  where  tuition  is  free 
throughout the 2007-2013 period,. This implies that the absolute level of tuition may not have a 
very  important  effect  on  demand.  Second,  the  introduction  of  tuition  fees  did  seem  to  cause  a 
temporary break in the upward trend in applications from the lowest-quintile youth. But within a 
year, the upward trend had resumed, so that application rates from lowest-quintile youth for the 
2013-14 year were the highest ever at just over 19%. 

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It therefore seems relatively safe to say that the introduction of very significant tuition fees has 
not had a noticeable effect on participation of lower-income students, and while significant gaps 
in  participation  remain,  youth  from  lower-income/lower  socio-economic  class  seem  to  not  be 
decreasing their share of the total student population. 

Ethnic Minorities 

The Higher Education Statistics Agency (HESA) provides data on the percentage of the student 
body  which  is  both  UK-domiciled  (i.e.  excluding  international  students)  and  non-white.  This 
data are shown below in Figure 4.14. As with the data on lower socio-economic classes, what is 
being  portrayed  here  is  not  an  increasing  rate  of  participation  but  an  increasing  share  of 
participation.  Again,  some  of  this  increase  could  be  related  to  a  rise  in  the  share  of  the  youth 
population which is non-white but it seems unlikely that this would account for all of it.  

Figure 4.14: Proportion of new enrolees who are visible minorities (1994-2011) 

20%

15%

10%

5%

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Source: Higher Education Statistics Agency. 

The HESA data show that the non-white share of domestic enrolments has increased by nearly 
half,  from  just  over  twelve  per  cent  to  just  over  eighteen.  Interestingly,  the  percentage  did  not 
start increasing in a sustainable way until after tuition fees began to rise. Since then, the rise has 
been  relatively  steady,  suggesting  that  neither  the  1998  nor  the  2006  tuition  fee  increases 
affected access for students from non-white backgrounds very much, if at all. 

Unfortunately, the data in Figure 4.14 end just before the major reform of 2012. However,  we 
can  examine  this  question  by  looking  at  applications  rather  than  enrolments,  as  the  central 
enrolment service UCAS provides breakdowns of the number of applications by ethnicity back 
to  2007.  Figure  4.15  shows  these  figures,  indexed  to  2007.  Application numbers  for  all  ethnic 
groups  rose  steadily  during  the  first  few  years  of  the  post-2006  period.  Application  numbers 
peaked  for  whites  in  2010  and  for  other  ethnicities  in  2011.  In  the  year  of  the  major  tuition 
reform, we see a dip in applications across all ethnic groups. However, the drop was stronger for 
Whites (9%) than for either Blacks (3%) or Asians (4%). And in all cases, application numbers 

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remained much stronger in 2012 than they had been six years earlier  when tuition had been 5-
6000 pounds cheaper. 

Figure 4.15: University applications by race, indexed to 2007 (2007-2012) 

200

180

160

140

120

100

80

60

2007

2008

2009

2010

2011

2012

White

Black

Asian

Note: Data for all UK countries. 
Source: Universities and Colleges Application Service. 

4.4  Completion Rates  

The UK does not systematically trace completion or continuation rates. However, it does track 
the proportion of full-time, first-year degree entrants who go on to start the following year. These 
statistics  are  shown  below  in  Figure  4.16.  The  figure  requires  little  comment.  To  the  extent 
continuation  rates  changed,  they  improved  and  there  is  no  obvious  connection  between  the 
improvements and changes in tuition rates. 

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Figure 4.16: First-to-second year attrition rates of full-time students (2001-2010) 

20,0

15,0

10,0

5,0

0,0

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Entrants under 21 yrs

Entrants over 21 yrs

Entrants under 21 yrs from low participation neighbourhoods

Source: Higher Education Statistics Agency. 

4.5  Evaluation 

The following evaluation consists of answering four separate sets of questions.  

First,  how  have  increases  in private  funding  changed  costs  to  students?  The  answer  is  that the 
changes in England were very substantial indeed. Annual tuition for domestic students rose from 
zero  to  roughly  7,800  pounds.  An  increase  in  grants  meant  that  this  was  offset  by  about  1000 
pounds. It is true that an extremely  generous loan scheme means that most students in fact are 
not paying anything out of pocket – indeed loans are still substantially larger than net tuition. But 
without a doubt the change in students costs in England are by far the largest of any of the nine 
countries in our study; indeed, the scale of the fee increase in 2012 is literally unprecedented in 
the history of higher education. 

The  second  question  here  is:  what  effect  does  an  increase  in  private  funding  have  on 
participation  rates?  The  answer  is  that  the  impact  it  is  surprisingly  slight.  Unequivocally, 
participation rose after both the 1998 and 2006 tuition fee increases – a sign in fact that higher 
fees  can  increase  participation  if  growth  in  study  places  is  constrained  due  to  restricted 
availability of public funds and fees are used to expand capacity. The 2012 increase, on the other 
hand, clearly did have a negative effect on demand, with applications falling by roughly 9% in 
the year of the increase. However, early indications from 2013 suggest that some of this loss will 
be regained in 2013, and indeed that applications from the traditional 18 year-old applicants may 
have  completely  recovered  their  2011  heights.  Even  if  not,  application  and  participation  rates 
now are still much above levels seen when domestic tuition was free. 

A third question is ‘how have changes in private funding affected the composition of the student 
body’?  The  answer  would  appear  to  be  ‘very  little’.  The  general  trends  in  participation  are 

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towards greater participation from women, students from low-income or lower socio-economic 
classes, and visible minorities. Neither the 2006 nor the 2012 tuition fee increases appear to have 
had the slightest impact on any of these trends. The only  way in which the composition of the 
student  body  appears  to  have  been  affected  is  with  respect  to  age  –  applications  from  older 
students appear to have been particularly hard-hit by the latest of the tuition fee increases.  

A  fourth  question  is  ‘how  have  changes  in  private  funding  affected  time-to-completion’?  This 
question cannot be answered directly because of a lack of statistics. But what can be confirmed is 
that attrition rates from first-to-second year have been falling steadily over the last decade, and 
that the 2006 increase in fees had no obvious effect on it. 

In sum, there were three major tuition increases in our period. There are little data to measure the 
effects of the first one, which was the smallest of the three. With respect to the 2006 increase, 
virtually  all  participation  indicators  were  better  after  the  increase  than  before  it.  This  suggests 
that a tuition increase which is accompanied by an increase in grants and loans, and an increase 
in  public  funding  for  institutions,  can  significantly  improve  access.  With  respect  to  the  2012 
increase, it is too soon to tell what the effects have been. The initial results seem to be negative, 
but not especially so – that is, applications have declined, but only back to about the levels of 
2010 (which was still among the best years ever for participation and applications).  It is worth 
noting that unlike 2006, the 2012 fee increase was accompanied by a drop in public funding and 
no increase in grants. 

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5.  HYPOTHESIS D: INCREASING PRIVATE FUNDING 
AFFECTS STUDENT CHOICE OF HOW OR WHAT TO 
STUDY 

This  chapter  looks  at  data  relevant  to  Hypothesis  D,  which  states  that  as  private  funding 
increases,  costs  increase  to  students  and  their  families,  which  in  turn  will  have  an  impact  on 
students’ choice of how and what to study (but not necessarily on the share of students studying). 
Accordingly, this section looks at these topics: have student age, location or field of study and 
time to completion changed over time in relation to cost-sharing? 

5.1  Student Study Patterns  

One  hypothesis  with  respect  to  the  effects  of  fees  is  that  students  will  be  tempted  to  choose  a 
cheaper  mode  of  study.  For  most  of  the  period  under  study,  this  was  not  possible  in  the  UK. 
Tuition  fees  did  not  vary  across  institutions  until  2012  and  part-time  study  fees  were  roughly 
proportional to full-time ones, meaning that they conferred no real cost-saving. And, as we have 
seen,  part-time  students  declined  as  a  percentage  of  the  overall  student  body  even  before  the 
tuition increases of 2006. 

Post-2012,  the  situation  changes  somewhat,  and  more  price  variation  occurred  between 
institutions. The data seem to indicate that not only did students not flock to cheaper alternatives, 
but that falls in applications and acceptances were more pronounced at HEIs charging less than 
9,000 pounds than at those that charged the maximum amount. 

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Figure 5.1: Application and entry rate changes (2012) 

0,0%

-1,0%

-2,0%

-3,0%

-4,0%

-5,0%

-6,0%

-7,0%

-8,0%

-9,0%

-6,5% 

-7,8% 

Applicants

-3,9% 

-5,0% 

Accepted

£9000

less than £9000

Note: Data for all UK countries.. Hence the actual declines were smaller. 
Source: Higher Education Statistics Agency. 

5.2  Location of Study  

It has always been a tradition in the United Kingdom for students to move away from home to go 
to  university.  Much  more  so  than  in  other  countries,  this  is  seen  as  a  key  rite  of  passage  to 
adulthood. Historically, two different bodies have tracked data on students living arrangements – 
the Local Education Authorities, who played a major role in student support prior to 1998, and 
the Higher Education Statistics Agency. Data from both sources are shown below in Figure 5.2. 

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Figure 5.2: Percentage of students living away from home (1994-2009) 

90%
88%
86%
84%
82%
80%
78%
76%
74%
72%
70%

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

% Living away from home (data from Local Education Authorities)

% Living away from home (data from HESA)

Note: Data for all UK countries. 
Source: Higher Education Statistics Agency, LEAs. 

Figure 5.2 shows that there has been a long and steady decline in the percentage of students who 
leave home to study; however, the start of this decline significantly predates the introduction of 
tuition fees. Indeed, over the period 1994-2009, when rates of living away from home fell from 
88% to 77%, more than half the decrease occurred prior to the Dearing reforms. Fees may have 
had  something  to do  with the decrease  after  1998, but  given the prior  trends  it  seems  unlikely 
that they were the decisive factor. 

A final possibility to investigate here is whether changes in cost-sharing resulted in an increasing 
number  of  students  leaving  the  country  to  study  for  reasons  of  cost.  Certainly  there  have  been 
news  stories  to  this  effect  in  the  wake  of  the  2012  increase  in  fees.  For  instance,  Maastricht 
University in the Netherlands, which performs much of its teaching in English and has targeted 
English  students  in  the  wake  of  the  fee  hike,  published  a  study  which  suggested  that  head 
teachers at prestigious English secondary schools were considerably more likely to recommend 
to their students that they consider studying abroad (Jobbins, 2013). Similarly, a number of top 
US universities said they had experienced an uptick of about ten percent in their enrolments from 
the UK in 2012 when the new regime was announced (Danby, 2013). These are plausible stories; 
as  fees  for  ‘standard’  English  universities  increase,  the  gap  between  these  universities  and 
competitors such as US Ivy  League schools decline. The American options still cost more, but 
the  price  differential  is  smaller  and  based  on  a  ‘value-for-money’  perspective,  they  may  now 
look  more  attractive.  Still,  these  numbers  are  very  small  overall  –  a  10%  increase  in  English 
students in top US universities still only barely amounts to 1,000 students, so while it is correct 
to  acknowledge  the  existence  of  this  phenomenon,  one  should  not  overstate  its  importance, 
either. 

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5.3  Field of Study  

Another hypothesis with respect to the effects of cost-sharing is that students will be attracted to 
less costly fields of study. However, as noted in Chapter 3, there has been almost no change in 
the distribution of fields of study in the period to 2011, which suggests that there was little in the 
way of major changes brought about by either the 1998 or 2006 tuition changes.  However, the 
UCAS  2012  end-of-year  report  noted  an  interesting  pattern.  It  took  the  2012  tuition  fee  by 
institution and programme and projected it backwards into the past, to see if students were more 
or less likely in 2012 to be taking less expensive programmes. The results are shown  in Figure 
5.3.  

Figure 5.3: Average fee of English accepted applicants (2004-2012) 

8 550

8 500

8 450

8 400

8 350

8 300

2004

2005

2006

2007

2008

2009

2010

2011

2012

Source: Universities and Colleges Admissions Service. 

Figure 5.3 requires some explanation. Obviously, English students were not paying 8,500 pounds 
in  2004.  What  they  were  doing  was  studying  in  programmes  which  in  2012  would  cost  that 
much. Thus, what the figure shows is that there has been a trend towards studying in ‘cheaper’ 
disciplines, but that this trend pre-dates the 2012 tuition change. Indeed, in 2012 itself, the trend 
actually reversed itself very slightly. 

One reason why there may not be much of a shift in terms of study patterns among students is 
that there has not been much a of shift in terms of employment prospects between disciplines. As 
Figure  5.4  shows,  with  the  exception  of  health,  most  fields  of  study  have  had  similar  (2-4%) 
negative  shocks  to  employment  rates  from  the  2008  financial  crisis.  Since  all  fields  are  being 
affected roughly similarly by economic change, there is no obvious reason to expect students to 
be switching fields. 

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Figure 5.4: Graduate employment rates six months after graduation, by field of 
study (2002-2010) 

100
98
96
94
92
90
88
86
84

Note: Rate is employment rate of all individuals who have completed a degree within the previous six years. 
Source: Higher Education Statistics Agency. 

2002

2006

2010

5.4  Time-to-Completion  

A final hypothesis with respect to the effects of cost-sharing is that students will complete their 
studies  more  quickly  to  reduce  their  costs.  No  data  with  respect  to  these  rates  were  available. 
However, to the extent that first-to-second year attrition (see Figure 4.15) rates are indicative of 
faster completion rates (which they may well be – students who leave may come back but have 
longer times-to-completion as a result), then perhaps there is an effect. But it would seem to be a 
relatively minor one. 

5.5  Evaluation 

Hypothesis D suggested that rather than having an absolute effect on the level of participation, 
the  liquidity  issues  that  stem  from  increased  tuition  levels  may  lead  to  students  switching  to  a 
different  mode  of  delivery  that  enables  them  to  study  whilst  working  and  earning  income,  or 
delay  participation  to  work  to  save  money  before  entering  higher  education.  Specifically,  four 
sub-hypotheses about the potential impact of higher tuition were examined:  

First, with respect to ‘how’ students study, it was hypothesised that increases in private funding 
might lead to changes in study mode (part-time versus full-time study) and delays in entry. As 
there was no financial advantage to part-time study, this was not the case. 

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Second,  with  respect  to  whether  increases  in  fees  have  affected  students’  choice  of  study 
location, there are several factors at work. Students do appear to be less likely to live away from 
home  than  they  did  twenty  years  ago,  but  since  much  of  the  decline  happened  prior  to  the 
introduction  of  tuition,  it  seems  unlikely  that  cost-sharing  has  had  much to  do  with  this.  With 
respect to choosing an actual institution, it seems that fees may have the opposite effect to what 
might be expected since in 2012 declines in number of applications and acceptances were greater 
at institutions which did not charge the maximum fee than at those which did. 

Third, with respect to whether increases in tuition have affected what students study, as noted in 
Chapter 3, there has in fact been very little change in study profiles in our study period. There 
has been a subtle shift towards ‘cheaper’ programmes in recent years, but again this trend long 
pre-dates a significant change in tuition policy. One possible reason for the lack of shift is that no 
field  of  study  has  increased  much  in  relative  value  in  recent  years,  and  that  relative  economic 
benefits are not shifting in a way that would make students rethink their study preferences. 

Fourth, with respect to increases in fees making students more efficient and taking less time to 
complete their education, there are little data available on which to test this proposition. It can be 
seen that first-to-second year attrition rates are decreasing, but it is difficult to infer much from 
this. 

In sum, it is very difficult to see an impact of changes in cost-sharing on these various forms of 
student  behaviour.  One  plausible  explanation  for  a  lack  of  impact  is  that  despite  higher  fees 
students have not in fact seen any diminution in liquidity. Because of the massive expansion in 
loan programmes that accompanied every tuition reform, net costs after loans remain below zero, 
very close to where they were in the period just after Dearing. Thus even though they are racking 
up fairly significant amounts of debt, because students do not feel cash-poor they are not altering 
their behaviour significantly. 

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6.  CONCLUSION 

Our  study  of  England  really  revolves  around  three  major  reforms  –  the  introduction  of  tuition 
fees in 1998 following the Dearing Report, the rise in tuition fees to 3000 pounds in 2006, and 
the final truly massive increase which was introduced in 2012 following the Browne report. Most 
of the important evidence here relates to the post-2006 period. It was a more significant reform 
than the 1998 reform, which in many ways was quite minor in terms of creating new cost-sharing 
streams, and there are better data on the post-2006 reform than we do for the more recent major 
reform.  

With  respect  to  Hypothesis  A,  it  can  be  said  that  the  cost  exercises  of  1998  and  2006  most 
certainly increased total funding. In both instances, public contributions rose at the same time as 
private ones. The 2012 reform was, however, a deliberate exercise in substituting private funds 
for public ones. 

With respect to Hypothesis B, it can be asserted with near-absolute confidence that institutional 
strategies  were  designed  to  maximise  revenue  from  private  sources,  but  this  should  not 
necessarily be taken as a change from a prior period as UK universities had for some time been 
market-driven with respect to taught Master and foreign students. Diversity of programming did 
increase at first, but then was pruned in anticipation of serious budget cuts after 2011. But there 
was no major shift of students across fields of study. There is also some evidence that English 
institutions have been paying more attention at ‘customer satisfaction’. 

With  respect  to  Hypothesis  C,  the  answer  is  mostly  negative.  Since  tuition  was  introduced, 
participation is up sharply, gender mixes have not changed, and the proportion of students who 
are either non-white and/or from lower socio-economic strata have increased. The 2012 reform 
does however seem to have put at least a pause on those gains. Applications fell – more strongly 
among whites than other races, and  much more strongly among older students. However, even 
with this change, application and participation of all groups remain well above where they were 
in 2006. 

Finally,  with  respect  to  Hypothesis  D,  the  answer  again  is  mostly  negative.  To  the  extent  that 
students  are  changing  their  institution,  they  are  moving  slightly  towards  the  more  expensive 
institutions. There has been a reduction in the proportion of students leaving home, but this trend 
started  well  before  increases  in  fees  became  a  reality  and  the  two  phenomena  may  not  be 
causally related. 

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REFERENCES 

Barr, N., & Crawford, I. (1998). The Dearing Report and the government’s response : a critique. 

Political Quarterly, 69(1), 72–84. 

Becker, G. S. (1962). Irrational behavior and economic theory. The Journal of Political 

Economy, 70(1), 1–13. 

Chowdry, H., Dearden, L., & Wyness, G. (2010). Higher education reforms: progressive but 

complicated with an unwelcome incentive. IFS Briefing Notes, BN113. London: Institute for 
Fiscal Studies. doi:10.1920/bn.ifs.2010.00113 

Danby, P. (2013, September 26). US universities targeting British students. The Independent. 
Retrieved from http://www.independent.co.uk/student/study-abroad/us-universities-
targeting-british-students-8842111.html 

Dearing Committee. (1997). The Dearing Report (1997): Higher Education in the learning 

society. London: Her Majesty’s Stationery Office. Retrieved from 
https://bei.leeds.ac.uk/partners/ncihe/ 

Goodman, A., & Kaplan, G. (2003). “Study now, pay later” or “HE for free”? An assessment of 
alternative proposals for higher education finance. London: Institute for Fiscal Studies. 
doi:10.1920/co.ifs.2003.0094 

Greenaway, D., & Haynes, M. (2003). Funding Higher Education in the UK: The Role of Fees 
and Loans*. The Economic Journal, 113(485), F150–F166. doi:10.1111/1468-0297.00102 

HM Treasury. (2010). Spending Review 2010. London: Her Majesty’s Stationery Office. 

Retrieved from 
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/203826/Spen
ding_review_2010.pdf 

Jobbins, D. (2013, September 17). Interest in study abroad grows among independent school 

students. University World News. Retrieved from 
http://www.universityworldnews.com/article.php?story=20130916153122157 

Johnston, A., & Barr, N. (2013). Student loan reform, interest subsidies and costly technicalities: 
lessons from the UK experience. Journal of Higher Education Policy and Management, 
35(2), 167–178. doi:10.1080/1360080X.2013.775925 

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Matthews, D. (2012, September 7). British Universities Embrace Marketing. The Times Higher 
Education. Retrieved from http://www.insidehighered.com/news/2012/09/07/british-
universities-turn-marketing#sthash.Jwo7EPtY.dpbs 

Matthews, D. (2013, February 7). University student marketing spend up 22%. The Times Higher 
Education. Retrieved from http://www.timeshighereducation.co.uk/news/university-student-
marketing-spend-up-22/2001356.article 

O’Reilly, L. (2013, March 26). Universities must take more commercial marketing approach. 

Marketing Week. Retrieved from http://www.marketingweek.co.uk/news/universities-must-
take-more-commercial-marketing-approach/4006109.article 

Pennell, H., & West, A. (2005). The Impact of Increased Fees on Participation in Higher 

Education in England. Higher Education Quarterly, 59(2), 127–137. doi:10.1111/j.1468-
2273.2005.00286.x 

Ramsden, B. (2004). Part-time students and part-time study in higher education in the UK. 

Strand 1: a quantitative data analysis of 2003/04 HESA data. A report for Universities UK 
and GuildHE. Retrieved from http://www.ihep.org/assets/files/gcfp-
files/Parttime_Students_Studey_Higher_Ed_UK1.pdf 

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FINLAND 

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ACKNOWLEDGEMENTS 

The authors would like to acknowledge the support in data research and interpretation provided 
by the following persons:  

  Jussi Kivistö, Ph.D., Adjunct Professor, University of Tampere 
  Elias Pekkola, M.A., University Instructor, University of Tampere. 

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1. 

INTRODUCTION 

1.1  Overview of Higher Education in Finland 

Finland  has  a  population  of  roughly  5.4  million.  Higher  education  has  an  important  place  in 
Finnish society: According to Eurostat measures, Finland has one of the highest higher education 
graduation rates in Europe. In 2012, 45.8% of the population aged 30-34 had a higher education 
degree.  

The Finnish higher education system is divided into two sectors: universities (Finnish  yliopisto) 
on  the  one  hand  and  polytechnics  (also  called  universities  of  applied  sciences,  Finnish 
ammattikorkeakoulu, AMK for short) on the other hand. The country’s 14 universities provide 
research-based academic education in (three year) Bachelor, (two year) Master and (four years) 
doctoral degree programmes.44 12 universities are public corporations, and two are foundations. 
Finland’s largest university is the University of Helsinki with around 36,000 enrolled students. 
The  smallest  universities  are  the  Hanken  School  of  Economics  and  the  University  of  the  Arts 
(both  Helsinki)  with  around  2,000  students  each.  Finland  also  has  two  Swedish-language 
universities, the Åbo Akademi University at Turku, and the Hanken School of Economics. The 
University of Helsinki is bilingual (Swedish and Finnish) by law. Many universities offer some 
of their courses in English. The average size of Finnish universities is around 11,000 students. 

The  first  polytechnics  began  to  operate  on  a  trial  basis  in  1991  and  were  made  permanent 
institutions in 1996. Most polytechnics were non-tertiary vocational education institutions before 
that time. In 2013, there were 25 polytechnics in Finland. Six are run by local authorities, seven 
by  municipal  education  consortia  and  13  by  private  organisations.  The  government  authorises 
their  study  programmes,  student  numbers  and  location.  It  also  acts  as  the  main  funding  body. 
Institutional funding for polytechnics is based on core funding for teaching, project funding and 
performance-based funding. Polytechnics provide vocational education on an advanced level and 
promote  applied  research  in  Bachelor  programmes  (3.5  to  4  years  duration)  and,  since  2005, 
programmes for polytechnic graduates (1.5 to 2 years duration), equivalent to a Master’s degree. 
In order to apply for a graduate programme at a polytechnic, holders of a polytechnic Bachelor 
degree  have  to  acquire  at  least  three  years  of  work  experience  after  graduation.  These 
polytechnic graduate programmes are much fewer in number than the Bachelor programmes: In 
2010,  less  than 5%  of  all  polytechnic  students  were  enrolled  in  such  programmes.  Like  in  the 
university sector, there are Swedish-language polytechnics in Finland, the largest of which is the 
Novia  University  of  Applied  Sciences.  The  average  student  number  at  Finnish  polytechnics  is 
below 5,000, i.e. less than half the size of universities. 

44 The standard degree at universities is the Master degree. The Bachelor/Master distinction is more or less a 
formality introduced to align with the two-cycle Bologna system. 

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Applicants  for  universities  and  polytechnics  are  often  required  to  take  entrance  examinations. 
Universities  use  a  numerus  clausus  in  order  to  restrict  entry  to  study  programmes.  Bachelor 
graduates of polytechnics are eligible to apply for a Master course at a university. 

After  the  rapid  development  of  the  polytechnic  sector  in  the  1990s,  both  universities  and 
polytechnics  are  now  almost  equal  in  terms  of  enrolment  capacity:  In  2009,  144,000  students 
were enrolled in universities (including 41,000 Master students), and 138,000 in polytechnics.  

The  Universities  Act  of  2009,  implemented  in  the  Finnish  university  sector  in  2010,  made 
universities  independent  corporations  under  public  law  or  foundations  under  private  law.  As  a 
result,  some  universities  merged,  such  as  the  Helsinki  University  of  Technology,  the  Helsinki 
School  of  Economics  and  the  University  of  Art  and  Design,  which  jointly  became  the  Aalto 
University.  Such  mergers  were  additionally  encouraged  by  government  policy  in  the  years 
following the new law. 

In  terms  of  the  development  of  new  approaches  to  cost-sharing,  the  University  Act  of  2009 
encouraged  universities  to  compete  for  international  research  funding  and  donations  and  to 
increase revenues from business ventures in order to diversify their funding base. Although this 
change of policy led towards greater financial autonomy for universities, charging general tuition 
fees is still not an option. However, the legislative reforms made it possible to charge tuition fees 
on a trial basis to students from countries outside the EU/EEA who are taking English-language 
Master programmes, provided a scholarship scheme is included.  

A  comparative  study  by  the  European  University  Association  (EUA)  rates  Finnish  higher 
education institutions’  (HEIs’)  autonomy  as  high in  the  areas  of internal organisational  affairs, 
staffing  and  student  admission.  In  contrast  to  this,  their  financial  autonomy  is  classified  as 
‘medium  low’  in  comparison  with  other  European  systems:  Although  HEIs  are  subject  to  few 
restrictions on how to spend the money allocated by the government and are allowed to borrow 
money and keep surplus, the prohibition of tuition fees in all but a small number of programmes 
is judged to obviate financial autonomy (EUA, n.d.-c). 

1.2  Key Higher Education Stakeholders 

The  Finnish  Ministry  of  Education  and  Culture  (Opetus-  ja  kulttuuriministeriö,  OKM)  is 
responsible  for  developing  the  general  educational  and  scientific  policies  and  is  the  main 
financier  of  HEIs.45  Funding  is  provided  for  a  period  of  three  years  (four  years  from  2013 
onwards) based on the resources required and operational and qualitative targets agreed between 
the Ministry and each university individually. The agreements also define how these targets are 
monitored  and  evaluated.  An  important  element  of  the  agreements  concerns  the  fields  of 
education and the study programmes a HEI provides. 

45 The National Defence University in Helsinki is supervised by the Ministry of Defence.  

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The Finnish National Board of Education (Opetushallitus, OPH) is a national agency subordinate 
to  the  Ministry  of  Education  and  Culture.  The  Board  is  in  charge  of  the  implementation  and 
monitoring  of  the  pre-primary  to  upper  secondary  education  sector  but  also  plays  a  role  in 
Finnish higher education. For instance, it decides on the  eligibility of foreign qualifications on 
the  Finnish  labour  market  (but  not,  for  instance,  on  the  eligibility  of  foreign  academic 
qualifications for further studies in Finland). The OPH can advise HEIs on questions relating to 
academic recognition upon request. 

During their studies, Finnish students and permanent residents of Finland are eligible to apply for 
financial  support  from  Kela,  the  Social  Insurance  Institution  of  Finland  (actually  a  tax-funded 
organisation  despite  its  designation)  that  cooperates  directly  with  the  education  institution 
concerned. Study aid is mainly provided in the form of study grants and housing supplements.  

Founded  in  1996,  the  Finnish  Higher  Education  Evaluation  Council  (Korkeakoulujen 
arviointineuvosto, KKA) consists of twelve members. It is funded by the Ministry of Education 
and Culture but is an independent expert body assisting higher educational institutions in matters 
of evaluation. The members  of the  KKA represent universities, polytechnics and students. The 
KKA aims to improve the quality assurance systems of HEIs, e.g. by providing audit manuals at 
the beginning of each new audit term. 

The  Academy  of  Finland  (Suomen  Akatemia)  is  the  primary  funding  agency  for  research  in 
Finland.  The  Academy  is  under  the  administrative  control  of  the  Ministry  of  Education;  it 
distributed  317  million  euros  of  aid  money  in  2013.  The  funding  is  provided  for  scientific 
research  at  universities  and  research  institutions  and  also  for  the  development  of  international 
research  networks.  Individuals  interested  in  taking  advantage  of  funding  opportunities  apply 
directly to the Academy. 

The  second  major  public  research  funding  agency  is  Tekes  (Finnish  Funding  Agency  for 
Technology  and  Innovation).  Tekes  is  part  of  the  Finnish  Ministry  of  Employment  and  the 
Economy  and  specializes  in  financing  research  in  the  areas  of  technology,  services,  design, 
business,  and  social  innovations.  In  2013,  the  budget  appropriation  for  Tekes  was  542  million 
euros,  which  Tekes  distributed  to  private  enterprise  projects,  HEIs  and  public  research 
institutions. 

The  Centre  for  International  Mobility  (CIMO)  is  a  governmental  agency  operating  under  the 
Ministry  of  Education  and  Culture  and  offers  various  services  in  internationalisation  and 
fostering  cross-cultural  communication.  The  CIMO  administers  exchange  programmes  and 
scholarships, it is responsible for implementing EU education programmes at the national level 
and promotes and organises international trainee exchanges. In the wake of the Bologna reform 
the  CIMO  collaborated  with  the  Ministry  of  Education  and  Culture  on  the  implementation  of 
Diploma Supplements and the European Credit Transfer System (ECTS). 

The  National  Union  of  University  Students  in  Finland  (Suomen  ylioppilaskuntien  liitto,  SYL), 
founded in 1921, is the student’s representative body. Membership in the SYL is compulsory for 
all students studying for a full degree at a Finnish university. The membership fee varies from 30 

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to  100  euros  per  year;  in  return  students  receive  reduced price  meals,  health  care  services  and 
other social benefits. The SYL participates in the Finnish Higher Education Evaluation Council 
and  the  Ministry  of  Education  and  Culture  to  improve  students’  rights,  financial  support  and 
equality.  SYL  also  takes  part  in  the  Student  Research  Foundation  (Otus)  that  was  founded  in 
1989  to  foster  independent  research  on  higher  education  and  students’  environment.  The 
polytechnic  sector  has  its  own  student  union  called  SAMOK  (Union  of  Students  in  Finnish 
Universities of Applied Sciences). 

1.3  How Governments Fund Institutions 

Universities 

After  a  long  period  of  applying  incremental,  line-item  budgeting  procedures  for  funding,  the 
government changed its policy in the beginning of the 1990s and adopted a block grant (lump 
sum) allocation model which included minor performance-based incentives. The majority of the 
funding was, however, still allocated on the basis of inputs necessary for the on-going operations 
of  institutions.  When  it  turned  out  that  this  model  did  not  provide  sufficient  incentives  for 
universities to follow the performance objectives set by the ministry, a new funding model was 
sought. Thus, the late 1990s and early 2000s witnessed the gradual introduction of more output- 
and  performance-driven  funding  models.46  The  objective  of  the  new  funding  approach  was  to 
secure accountability by offering universities incentives to increase efficiency, effectiveness, and 
quality of education and research. 

The  policy  of  the  Ministry  of  Education  and  Culture  has been  to  adjust the  university  funding 
model  every  three  years,  which  was  the  standard  lifespan  of  performance  agreements  between 
the Ministry and universities throughout the period 1995-2011. As a part of these adjustments, 
new indicators were introduced and old ones removed, and weightings of indicators were altered. 
Nevertheless, in general, these changes have been quite moderate so as to provide  stability and 
predictability for universities. 

Across  the  funding  periods  from  2001-2012,  between  70%  and  90%  of  state  funding  to 
universities was based on indicators.47 The indicators were mostly aimed at four different areas: 
facilities  and  staff,  teaching  (e.g.  number  of  Master  degrees),  research  (including  number  of 
doctoral degrees and amount of external funding), and other activities, such as contributions to 
national tasks and societal services. The models included a mixture of input- and output-related 
indicators.  Usually,  both  targeted  and  realised  values  were  appraised.  There  were  no  formal 
sanctions in case targets were not met, but past target achievement is taken into account in future 
negotiations.  Teaching-related  indicators  always  represented  the  most  important  field  of 
performance in the models, followed by research, which was introduced to the funding model as 
a special field in 2004. The proportion of state budgets not included in the indicator-based model 

46 In 1998, only 15% of the state funding was allocated by applying the model. The model became 100% effective in 
2003. 
47 The remaining shares were distributed for special projects and programmes, and institutions‘ contributions to 
national tasks. 

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was allocated to specific purposes, such as support for specific policy programmes launched by 
the  government,  including  measures  to  improve  the  quality  of  teaching  and  research,  strategic 
development, or further performance-based funding.   

Polytechnics 

Compared to universities, funding for polytechnics is more complex, but at the same time more 
stable.  During  the  period  1995-2011,  there  were  only  few  and  relatively  small  changes  in  the 
funding models.  

The providers of polytechnic education (local authorities, joint municipal bodies or foundations) 
received  core  funding  from  the  state.  Under  the  Polytechnics  Act,  the  government  provided 
roughly 57% of the core funding and local authorities the remaining 43% up to the year 2007. 
From 2008 onwards, the respective funding shares have been roughly 42% and 58%. The state 
government share is recorded in the state budget as a net amount. The local authorities' share of 
the  financing  also  goes  through  the  state  government.  If  the  education  provider  is  a  local 
authority,  its  own  financing  share  is  deducted  from  the  amount  allocated,  whereas  joint 
municipal  boards  and  private  educational  providers  receive  their  entire  core  funding  from  the 
government. Throughout the period of investigation, funding has been provided in the form of 
block grants. 

Polytechnics receive three types of state funding: core funding, project funding and performance-
based funding. 

  Core funding: The system of core funding includes both statutory aid and subsidies for 
running  costs  and  new  projects.  Core  funding  is  provided  on  the  basis  of  targeted 
graduate  numbers,  weighted  by  field  of  study.  After  2006,  the  average  number  of 
awarded degrees (both Bachelor and Master) was included in the calculation of unit costs 
with a 30% weighting.  

  Project funding: Project funding has been targeted to support national policy programmes 

as well as policies and projects of individual polytechnics.  

  Performance-based funding: The criteria for awarding performance funding have varied 
and  grown  throughout  the  period  of  investigation.  Whereas,  in  1998,  the  criteria 
comprised only four performance indicators related to internationalisation, employability 
of graduates, professional development of teachers and completion rates, the number of 
indicators in the period 2007-2009 was no less than 26.  

Input-oriented  core  funding  has  been  the  most  important  category  of  funding,  accounting  for 
approximately 80%-90% of all state government funding. According to Räty et al. (2008, cited in 
Opetus- ja kulttuuriministeriö, 2010, p. 9/19), the role of project and performance-based funding 
has been rather insignificant in providing operational incentives for polytechnics. 

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 1.4  History of Cost-Sharing 

Tuition fees 

In Finland, higher education leading to Bachelor, Master and doctoral degrees is free of charge 
for  domestic  and  EU/EEA  students.  The  most  common  argument  for  tuition-free  higher 
education  is  that  it  ensures  social  inclusiveness  and  equality  of  opportunities.  In  2010,  the 
government allowed HEIs to charge upfront tuition fees from non-EU/EEA students in selected 
Master programmes on an experimental basis during a trial period from 2010 to 2014. In these 
programmes,  both  universities  and  polytechnics  can  freely  set  their  fee  level,  but  at  the  same 
time,  they  are  required  by  the  legislation  to  provide  some  sort  of  scholarship  schemes  for  the 
student  group  from  which  fees  are  collected.  The  design  of  these  scholarship  schemes  is  not 
specified in the legislation. The average amount of fees collected from students in the pilot phase 
is 8,000 euros per year. 

Study aid policy 

Finland  has  a  comprehensive  public  study  aid  system  for  different  types  of  expenses.  Most 
important are study  grants  (opintoraha), which cover (or partly cover) students’ cost of living, 
and  housing  supplements  (asumislisä).  Even  though  the  system  includes  some  needs-based 
differentiations, e.g. living with one’s parents or away from home, age and marital status, most 
students  receive  the  same  amount  of  assistance.  Student  loans  are  offered  by  banks,  with  the 
government providing a loan guarantee. The most important changes in the period 1995-2010 are 
listed below.  

  1997: The maximum study aid period was extended for students in certain fields of study, 

and for a number of special reasons. 

  2000: The coverage of housing supplements was raised from 67% to 80% of the defined 

maximum rent. 

  2000-2007: Meal subsidies were increased by 42% (from 1.18 to 1.67 euros per meal). 
  2005:  The  calculation  of  maximum  time  period  for  a  student  to  receive  study  aid  was 

adjusted. Effects on the actual length of the study aid period were minor.  

  2005: Student loan tax deductions were introduced (effective for students enrolled in the 
academic  year  2005–2006  or  later).  Eligibility  for  loan  tax  deduction  requires  that  a 
student completes his/her degree within a set time period and at the end of the semester in 
which  a  student  completes  his/her  degree,  he/she  has  more  than  2,500  euros  in 
outstanding student loan debt taken out during the studies. The deduction is equal to 30% 
of qualifying debt exceeding 2,500 euros. 

  2005: The amount of government guarantee for a student loan was raised by 36%, from 

220 euros to 300 euros per month. 

  2005: The defined maximum rent used for calculating the value of housing supplements 
was raised by 38 euros (from 214 to 252 euros). As of 2013, housing supplement covers 
80% of the rent for amounts of up to 252 euros per month. If the rent exceeds 252 euros, 
the student still receives 80% of this maximum amount. 

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  2008: The amount of other income a student can have without affecting the availability of 
the study grant and housing supplement was raised by 30%. In 2013, for each month a 
student  receives  the  study  grant  or  the  housing  supplement,  the  exempt  amount  is  on 
average  660  euros,  and  for  each  aid-free  month  1,970  euros.  Assuming  that  a  student 
received aid for nine months, he/she would be allowed to have up to 11,850 euros a year 
in other income. 

  2008:  The  amount  of  the  study  grant  was  adjusted,  resulting  in  a  monthly  increase  per 

student of roughly 40 euros. As of 2013, the standard monthly grant is 298 euros. 

Policies designed to increase private investment in higher education 

In the political discussion concerning higher education funding, increasing the share of private 
revenue for HEIs (from sources other than tuition) has been considered desirable by most parties 
in  the  period  1995-2010.  Nonetheless,  before  passing  the  new  Universities  Act  which  became 
effective  in  January  2010,  government  policies  encouraging  the  generation  of  private  revenue 
were minor or non-existent. The new Universities Act made  universities independent legal and 
economic entities. This change was at least partly motivated by the expectation that, being more 
independent  in  legal  and  economic  terms,  universities  would  be  better  equipped  to  generate 
private revenue. 

Funding models for both universities and polytechnics have offered minor incentives to increase 
the  share  of  ‘external’  or  ‘service-based’  (i.e.  not  necessarily  private)  funding  from  research 
and/or  education.  In  the  case  of  universities,  such  incentives  were  first  made  part  of  the 
performance-based  funding  models  in  the  periods  2001-2006.  In  the  case  of  polytechnics  the 
share of revenues from services was made a performance indicator in the period 2007-2009, and 
again in the period 2010-2012, in which the share of revenue from domestic/foreign companies 
and from EU programmes was introduced as an additional performance indicator. 

In 2007, a new law which specified the property rights of patents and inventions made in HEIs 
became effective.  The law classified research activities at HEIs as ‘contract research’ or ‘open 
research’. If research involves third parties financing, it is considered ‘contract research’. In this 
case,  HEIs  are  entitled  to  claim  property  rights  in  inventions  made  in  this  research,  enabling 
them to generate profits from it.  

There  is  a  weak  culture  of  private  donations  in  Finland,  which  according  to  one  of  the 
interviewed experts can be linked to Finland’s strong welfare state tradition. In the years 1995-
2007,  there  were  no  significant  changes  in  policies  related  to  donations.  The  new  Universities 
Act marked a clear policy change in promoting private donations for HEIs.  These changes are 
specified below: 

2008: The maximum sum of tax-deductible donations of private foundations and companies 

is raised from 25,000 euros to 250,000 euros.  

2009: Donations of individuals worth 850 - 250,000 euros are made tax-deductible. 

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2010-2011:  The  government  promotes  donations  for  HEIs  from  individuals  and  private 
foundations and companies by establishing a temporary matching-fund scheme in which 
the government offers to pay universities 250% of the amount they receive from private 
donations. 

In  2008,  a  new  passage  was  inserted  into  both  the  Universities  Act  and  the  Polytechnics  Act 
stating  that  a  university  may  arrange  degree  education  geared  to  groups  of  non-EEA  students 
which  has  been  commissioned  and  is  paid  by  the  Finnish  government,  another  state,  an 
international organisation, a public or private corporation, or a foundation. This arrangement is 
called  ‘made-to-order  education’,  and  it  is  required  that  universities  engaging  in  this  kind  of 
activity must charge fees covering at least the costs incurring from it. Made-to-order education is 
an  opportunity  for  Finnish  HEIs  to  generate  private  revenues  by  ‘exporting’  their  services  to 
recipients outside the EEA.  

1.5  History of Enrolment 

National policies affecting admission 

Even  though  Finnish  HEIs  are  autonomous  in  many  respects,  the  basic  educational  mission  of 
each institution must be agreed with the Ministry of Education and Culture. Universities are thus 
not allowed to initiate degree-based training in new disciplinary fields (e.g. engineering, medical 
science or law) without prior approval of the Ministry. The purpose of this restriction is to ensure 
national  coordination  and  the  quality  of  the  programmes  within  the  scope  of  the  institutions’ 
educational  responsibilities  and  the  (public)  resources  available  to  them.  According  to  expert 
statements,  this  policy  choice  is  grounded  in  a  welfare  state-influenced  perspective  in  which 
forecasting  labour  market  demands  plays  an  important  role.  This  is  particularly  the  case  for 
(public) professions for which university degrees have traditionally served as a screening device. 
These forecasts of labour market needs, adjusted to reflect policy targets, form the basis for the 
national  six-year  Development  Plans  of  Education  and  Research  providing  the  framework  for 
education supply.  The development plans also provide the framework for negotiations between 
the Ministry and individual HEIs. 

Once an HEI has reached an agreement with the Ministry concerning which fields of education, 
subjects or programmes leading to a degree it will offer, the institution can decide freely on how 
to  handle  admission.  Both  universities  and  polytechnics  apply  a  numerus  clausus  for  most 
subjects,  which  can  be  fleshed  out  in  different  ways:  It  can  focus  on  matriculation  grades, 
previous experience, various types of entrance examinations, or a mixture thereof. Depending on 
the  popularity  of  a  programme,  this  system  produces  long  waiting  times  and  relatively  high 
rejection rates, forcing many prospective students to delay entry into higher education.48 This is 
especially  true  for  the  university  sector,  for  which there  is  no  centralised application platform. 

48 Leitner, Ecker and Steindl (2011, p. 89) report that rejection rates in recent years have been between 40% and 
55%, and that depending on the subjects students wait between one and three years before they receive their study 
place. 

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Discussions about how to mitigate this situation are on-going, and a new centralised application 
platform for both polytechnics and universities is scheduled to be launched in 2014. 

In the years 1995-2010, there were no significant legislative changes affecting admission policies 
for HEIs. Below is a description of how enrolment is handled in universities and polytechnics. 

Enrolment in universities 

Finland’s  university  admission  system  is  highly  decentralized.  Finnish  universities  and 
individual departments within them are free to establish their own criteria for the admission of 
students.49  University  applicants  are  typically  admitted  based  on  an  entrance  examination  and 
matriculation examination results. In the majority of cases entrance examinations differ from one 
university to another. One reason for the growth of various forms of entrance examinations has 
been  the  belief  that  success  in  general  upper  secondary  school  does  not  necessarily  predict 
success in higher education studies. Separate examinations have also served as a part of ‘second 
chance’  policies,  especially  in  those  fields  where  the  number  of  adult  applicants  is  relatively 
high.  Therefore,  nearly  all  programmes  have  a  quota  where  admittance  is  based  solely  on  the 
entrance  exam.  The  quota  gives  a  second  chance  to  students  who  fared  badly  in  their 
matriculation exam or only have a vocational upper secondary school diploma.  

Enrolment in polytechnics 

Polytechnics  are  also  authorised  to  establish  their  own  criteria  for  the  admission  of  students. 
Matriculation  results  are  typically  one  admission  criterion,  and  interviews,  tests  of  aptitude  or 
suitability may also be used. In contrast to the university sector, the government has established a 
joint application system for polytechnic institutions. 

Figure 1.1 shows enrolment in universities and polytechnics during the period of investigation. 
We see that there was a strong increase in enrolment between 1995 and 2000, which was mainly 
due  to  a  rapid  growth  of  enrolments  in  polytechnics.  To  some  degree,  this  development  is 
connected  with  the  re-classification  of  formerly  non-tertiary  vocational  institutions  into 
polytechnics,  i.e.  higher  education  institutions.  In  the  2000s  the  growth  slowed  down,  with  a 
slight decline in 2008. Overall, the number of enrolled students more than doubled in the sixteen 
years under consideration here. 

49 HEIs are however not free to choose how many students they admit – this is a matter of negotiation between 
institutions and the Ministry of Education and Culture 

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Figure 1.1: Enrolment in higher education by type of HEI (1995-2010) 

Source:  KOTA50  /  Vipunen51  /  Ministry  of  Education  and  Culture:  Higher  Education  Report  (2009)  /  Statistics 
Finland. 

Figure  1.2  presents  an  approximation  of  the  rate  of  transition  from  upper  secondary  to  higher 
education. This rate was highest in the early 2000s (2001: 78%) and decreased to 72% in 2010. 

50 Online service, maintained by the Ministry of Education and Culture, offers statistical data on universities and 
fields of education from 1981 to 2010 (https://kotaplus.csc.fi/online/Etusivu.do). 
51 Statistical services maintained by the Ministry of Education and Culture (http://vipunen.csc.fi/fi-
fi/ohjeet/Pages/default.aspx). 

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Figure 1.2: Transition rates from upper secondary school (1998 - 2010)  

Note:  The  transition  rate  is  approximated  as  the  ratio  of  new  entrants  in  higher  education  in  each  year  to  the 
number of upper secondary-school leavers with a higher education entrance qualification in the same year. 
Source: KOTA/ Vipunen / Ministry of Education and Culture (2009) / own calculations. 

Finally, Figure 1.3 represents higher education participation in the group of ‘best four years’, i.e. 
participation  by  students  in  the  four  age-years  with  the  highest  participation  rates  in  higher 
education.  For  Finland,  this  is  the  group  of  persons  aged  21-24.  The  figure  shows  that 
participation in the best four years remained relatively stable at around 42% after an increase in 
the years 1998-2001, and dropped to slightly below 40% in 2009/2010. The same pattern is also 
visible for the best four years-students in absolute numbers. The entire population in the best four 
years  remained  relatively  stable  with  minor  ups  and  downs  that  did  not  influence  student 
numbers. This means that the slight increase in participation is not due to a decline in the group 
of potential students, but actually an effect of educational upward mobility. 

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Figure 1.3: Students, population and higher education participation in age group 
of ‘best four years’ (1998 - 2010)  

Note: Best four years: Age 20-23 in 1998, age 21-24 in 1999-2010. Best four years accounts for 39% of all students. 
Source: OECD statistics / Statistics Finland52 

Figure 1.3 also shows that the increase in enrolment numbers in the 2000s (Figure 1.1) was not 
due to the group of best-four-years students. The statistics show that it was rather the group of 
mature students that drove to this growth. The number of enrolments of students aged 40+ grew 
by 62% in the years 1998-2010. In 2010, this group accounted for 12% of Finnish students. 

52 Available at http://www.stat.fi/index.html. 

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2.  HYPOTHESIS A: AS PRIVATE FUNDING INCREASES, 

INSTITUTIONAL REVENUE INCREASES 

This  chapter  looks  at  data  relevant  to  Hypothesis  A,  which  argues  that  as  private  funding 
increases,  institutional  revenue  increases,  but  only  if  public  funding  remains  constant.  That 
means that it will look at whether: 

 
 
 

there has been an increase in private funding 
there has been a concurrent change to public funding 
there has been a total increase in funding and whether this is related to changes in private 
and public revenues. 

Changes  in institutional  funding  will  be  considered  both  in  terms  of  total  institutional  revenue 
and relative to the number of students. 

2.1  Changes in Institutional Revenues over Time 

This  section  compares  the  absolute  and  relative  amounts  of  funding  to  Finnish  HEIs  from 
different sources. Universities and polytechnics will be represented separately in Figures 2.1 and 
2.2  below.  For  universities,  the  category  ‘public  funding’  subsumes  institutional  core  funding 
from  the  government,  public  third-party  funding  and  EU  funding.  Private  funding  includes 
funding  from  domestic  and  foreign  business.  The  category  ‘other  funding’  subsumes  various 
funding  sources  that  cannot  be  clearly  classified  as  public  or  private:  Included  are  additional 
funds  from  public  sources  (e.g.  municipalities  or  ministries  other  than  the  Ministry  for 
Education) and private sources (e.g. foundations and trusts) as well income from foreign sources 
whose public/private status cannot be determined. 

For polytechnics, a two-fold distinction will be made between public funds - defined as the sum 
of government funding, funding from the maintenance body and other state funding  - and other 
funds. The latter category cannot be differentiated according to either public or private sources. It 
includes  revenues  from  the  sale  of  goods  and  services,  charges,  donations,  sponsorships, 
revenues from interest and invested equity, etc. 

Both  graphs  clearly  show  that  Finnish  higher  education  is  predominantly  publicly  funded.  For 
universities, the share of private funding oscillates between a low of 5.9% (in 2009) and a high 
of 7.6% (in 2002). 

In polytechnics, the exact amount of private funding cannot be determined due to the way data 
are  reported.  Figure  2.2  demonstrates,  however,  that  the  private  contribution  to  funding  of 
polytechnics must be below 18% (this is the maximum share of the category ‘other’ in 2006). 

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Figure 2.1: Relative amounts of funding to universities from different sources 
(1999-2009)

Note: Constant prices (2011). 
Source: KOTA / Ministry for Education and Culture / National Board of Education / own calculations. 

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Figure 2.2: Relative amounts of funding to polytechnics from different sources 
(1999-2010) 

Note: Constant prices (2011). 
Source: KOTA / Ministry for Education and Culture / National Board of Education / own calculations. 

The absolute amount of funding per source is shown in Figure 2.3, for universities, and in Figure 
2.4 for polytechnics. The figures show that public funding to both universities and polytechnics 
increased markedly. In the university sector, institutional core funding almost doubled between 
1995  and  2009,  and  income  from  public  third-party  funders  (not  displayed  separately  above) 
increased  by  a  factor  of  6.  For  polytechnics,  too,  institutional  core  funding  is  by  far  the  most 
important  source  of  income.  It  nearly  tripled  in  the  years  between  1999  and  2010,  from  319 
million euros in 1999 to 882 million euros in 2010. This strong increase is related to a concurrent 
growth of the entire polytechnics sector. The second most important income for polytechnics are 
charges for services. Revenues from this source increased from 77 million euros in 1999 to 132 
million  euros  in  2010.  This  growth  progressed  linearly  except  for  a  short  decline  in  2008/09, 
presumably as a consequence of the global economic crisis.  

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Figure 2.3: Funding to universities from different sources (1999-2009)53 

Note:  Category  ‘other  (non-assignable)’  includes  funding  from  public  authorities  other  than  the  Ministry  of 
Education  and  Culture  (e.g.  municipalities,  other  ministries)  as  well  as  private  bodies  not  listed  as  companies 
(foundations, funds/trusts etc.). Constant prices (2011). 
Source: KOTA.  

53 Finland introduced the euro as a currency in 2002. Before, the national currency was the Finnish markka. Its 
currency rate was fixed: 1 euro equals 5.94573 Finnish markka. All calculations in this report are based on this 
equivalence for the years up to and including 2001. 

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Figure 2.4: Funding to polytechnics from different sources (1999-2010) 

Note: Category ‘other (non-assignable)’ includes public and private revenue from educational and other services, 
EU-funding, business incubator revenues, farming and foresting revenues, revenues from research, development 
and  innovation  activities,  from  sold  goods  and  equipment,  from  charges  for  utilities  and  rents,  donations  and 
grants/subsidies, from learning materials sold to students, sponsorship revenue and fees collected from students 
(open university courses, specialization courses). Constant prices (2011). 
Source: Finnish National Board of Education / Statistics Finland. 

Summarising the results so far, both the Finnish university and polytechnics sectors are to a large 
degree funded by public sources. Moreover, no direct correlations between the levels and shares 
of public and private funding could be observed. The expansion of the Finnish higher education 
system  appears  to  have  been  financed  primarily  by  increases  in  public  funding  to  both 
universities and polytechnics. 

To see how higher education financing is linked to Finland’s economic development, Figure 2.5 
shows  spending  on  higher  education  (universities  and  polytechnics  combined)  by  source  in 
relation to the country’s GDP. The figure  shows that private funding to HEIs as a percentage of 
GDP remained relatively stable throughout the years 1999-2009, whereas that of public funding 
was more volatile. Having increased until 2004, the proportion declined between 2004 and 2007, 
and continued to increase thereafter due to a decrease in GDP performance. 

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Figure 2.5: Higher education funding by source as a percentage of GDP (1999-
2009) 

Note: Excludes all income not clearly attributable to either public or private sources. Constant prices (2011). 
Source: KOTA / National Board of Education / OECD statistics (GDP). 

2.2  Institutional Expenditure 

This  section  focusses  on  how  changes  in  overall  income  of  HEIs  affect  spending  on  students. 
Therefore it is assumed that institutional core funding is equal to the portion of the budget that 
covers teaching costs. Hence, for Figure 2.6, income per student has been defined as institutional 
core  funding  divided  by  total  number  of  students.  As  the  graph  shows,  income  per  student 
increased for both types of institutions. Income per student in universities increased by a factor 
of  1.28  (1995-2009).  The  progression  of  the  line  is  roughly  as  one  would  expect  from  the 
enrolment figures (Figure 1.1): Slightly downward-pointing in times of increasing demand and 
stabilising  simultaneous  with  the  consolidation  of  enrolment  numbers.  The  sharp  increase  in 
2008 was due to a drop in student numbers combined with a simultaneous increase in funding.54 
In polytechnics, funding increased by a factor of 1.65 (1999-2010). 

54 The drop in student numbers is most likely due to the end of the transition period to the two 
cycle degree structure: Many students who had not completed their studies within the transition 
period ending in 2008 left university. 

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Figure 2.6: Institutional income from core funding per student by HEI type 
(1995-2010) 

Note: Constant prices (2011). 
Source: KOTA / Vipunen / Ministry of Education and Culture: Higher Education Report (2009).  

A  more  indirect  way  of  investigating  the  influence  of  changes  in  higher  education  funding  on 
studying conditions is to look at student-staff-ratios, which are shown in Figure 2.7. The graph 
shows a clear difference between universities and polytechnics: Whereas the student-staff-ratio 
remained  relatively  constant  in  universities,  the  pattern  in  polytechnics  is  marked  by  a  steep 
increase in students per staff in the years between 1997 and 2000, when the number of students 
enrolled at polytechnics increased strongly but staff numbers did not. This is in contrast with the 
pattern in Figure 2.6, which shows an increase in per-student funding. A national expert who was 
interviewed on this commented that the additional funds for polytechnics were mostly spent on 
increases  in  salaries  and  other  personnel  related  costs  of  academic  staff,  increased  costs  in 
administration and facilities as well as increased research and development tasks of polytechnics. 
This could explain why increased per-student funding did not result in smaller student-per-staff 
ratios during that period. After 2000, student and staff numbers increased simultaneously. 

Where the university sector is concerned, it can be seen that the growth of funding to institutions 
kept up with the growth of student numbers both in terms of funding per student and in terms of 

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academic  staff  per  student.  The  student-per-staff  ratio  even  decreased  over  time,  from  a  little 
over 10 in 1995 to 7.8 in 2010. 

Figure 2.7: Students per academic staff (1995-2010) 

Note: Research staff is included in calculation. 
Source: KOTA / Ministry of Education and Culture: Higher Education Report (2007/2009/2011) / Finnish Board of 
Education / Vipunen / own calculation. 

2.3  Evaluation 

This chapter showed first of all that Finnish HEIs are to a very large degree publicly funded. In 
the absence of tuition fees, the major source of private funding is through third-party funds for 
university research and, particularly in the case of polytechnics, diverse  other services offered, 
partly to private customers. The precise amount of private funding to HEIs could not be specified 
due to the way data are reported. Even so, the figures reveal that private third-party funding plays 
a minor role when compared to public institutional core funding and public project funding. In 
fact,  there  has  been  no  increase  in  the  share  of  private  revenues  for  either  universities  or 
polytechnics. This means that Hypothesis A cannot be verified or falsified in the Finnish case.  

Nevertheless it is interesting that the Finnish higher education system expanded at the same time 
as other countries’ higher education systems, such as Canada’s or Germany’s – also examined in 

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this study – yet Finland managed this expansion without introducing tuition fees. In fact, public 
per-student  spending  increased  continually  even  at  times  when  total  student  numbers  were 
increasing. The notion of higher education as a public good seems to be entrenched in Finnish 
society to such a degree that even a considerable expansion of the higher education sector has not 
resulted  in  an  increase  in  the  use  of  private  financing  sources.  Changes  in  the  status  of 
universities  and polytechnics  enforced  through  legislative  reforms  are  to  some  extent  aimed at 
encouraging HEIs to better exploit private funding sources, but the data gathered for this study 
do not show any clear effects in this regard. 

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3.  HYPOTHESIS B: AS THE INCENTIVES TO EARN 
PRIVATE FUNDING INCREASE, INSTITUTIONS 
BECOME MORE RESPONSIVE TO USER DEMAND 

This  chapter  looks  at  data  relevant  to  Hypothesis  B,  which  states  that  as  incentives  to  earn 
private  funding  increase,  institutions  become  more  responsive  to  user  demand.  However,  this 
expected  effect  is  conditional  on  the  attractiveness  of  these  private  revenues  and  whether 
increasing these revenues has trade-off effects for the overall behaviour or prestige of HEIs.  

Various aspects of responsiveness will be examined, including changes to provision, enrolment 
and the connection between HEIS and users. If no changes to responsiveness are visible, this is 
likely  related  to  the  incentive  structure  present  in  the  higher  education  system,  which  might 
favour other behaviours such as the maximisation of public over private funding. 

In  Finland,  higher  education  funding  relies  to  a  large  degree  on  public  contributions,  as  was 
shown in the preceding chapter. In in this chapter, it will be shown that this also influences the 
way  responsiveness  of  institutions  works:  It  is  in  many  cases  mediated  by  governmental 
interventions rather than directly stimulated by private income. 

3.1  Enrolment by Discipline 

The  aim  of  section  3.1  is  to  examine  whether  HEIs  changed  their  provision  of  study 
programmes, and whether any such changes can be related to cost-sharing considerations. As a 
proxy for changes in provision, enrolment patterns of new entrants will be used. The results are 
presented  in  Figures  3.1  and  3.2.  A  distinction  is  made  between  universities  and  polytechnics 
because  the  two  types  of  HEIs  differ  considerably  in  the  range  of  programmes  offered.  For 
universities,  subjects  were  categorised  based  on  OECD  (2002,  p.67).  For  polytechnics,  the 
original categorisation from the national data source was used.  

The figures show relatively stable patterns for both universities and polytechnics. Fluctuations on 
a  minor  scale  are  visible  for  social  sciences,  business  and  administration  as  well  as  social 
services, health and sports in polytechnics. Overall, the expansion of the polytechnics sector does 
not  seem  to  have  had  drastic  effects  on  the  profile  of  the  university  sector  in  terms  of  the 
importance of different fields of study. In any case, it should be kept in mind that in Finland the 
provision of higher education is not primarily a matter of direct reaction to student demand, but 
is organised in coordination with the Ministry of Education and Culture and its higher education 
planning  strategy  (see  Section  1.6).  From  the  perspective  of  HEIs,  the  provision  of  study 
programmes is primarily a matter of reaching an agreement with the Ministry. These agreements 
include  multi-annual  funding  arrangements  securing  financial  stability  for  institutions  (see 

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Section 1.4).  Issues  of  student demand  have  a  more  indirect  bearing  in this system,  e.g.  in the 
sense that the number of degrees an HEI confers influences the amount of state funding. 

Figure 3.1: Distribution of enrolment by field of study in universities (1995–
2010) 

Source: Ministry of Education / Vipunen / Statistics Finland /KOTA / own calculations. 

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Figure 3.2: Distribution of enrolment by field of study in polytechnics (1995–
2010) 

Source: Ministry of Education / Vipunen / Statistics Finland. 

3.2  Enrolment Patterns by Mode 

In  the  absence  of  tuition  fees,  Finnish  HEIs  have  no  opportunities  to  maximize  revenues  by 
promoting  more  profitable  modes  of  study  over  others.  Moreover,  there  is  no  official  status 
distinction between full-time and part-time students in Finland. Survey data (2000-2009) show 
that the share of part-time students in Finland is around 20%-25% in universities and 8%-16% in 
polytechnics. The figures are based on students’ own understanding of ‘full-time/part-time’. The 
issue  of  full  versus  part-time  will  be  taken  up  in  more  detail  in  Section 5.2,  where  changes  in 
study behaviour are discussed. 

3.3  Enrolment Composition 

The aim of this section is to investigate changes in enrolment composition as a consequence of 
HEIs attracting specific groups of students. Since Finnish HEIs did not charge tuition fees at all 

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in  the  period  of  investigation,  any  changes  in  enrolment  cannot  be  directly  related  to  cost-
sharing. Since autumn 2010, Finnish HEIs have been allowed to collect tuition fees from non-
EU/EEA students in English-language Master programmes. Tuition varies between 2,500 euros 
and 12,000 euros per year, the average amount being 8,000 euros. In 2011, no more than 110 fee-
paying students from non EU/EEA countries were enrolled in Finnish HEIs. 

Although international  students  are  not  a  source  of  additional  income  through  fees  for  Finnish 
HEIs, international student numbers increased quite steadily in the period of investigation, and 
particularly in the latter half of the 2000s, as Figure 3.3 shows: 

Figure 3.3: International student enrolment as a percentage of total student 
population (1995-2009) 

Source: KOTA. 

3.4  Diversity of Provision 

This  section  deals  with  changes  in  the  number  of  study  programmes  and  the  number  of 
institutions. While no data on the number of programmes  were available  for  Finland, the most 
significant change in terms institutional diversity was certainly the development and subsequent 
consolidation  of  the  polytechnic  sector.  Figure  3.4  shows  the  number  of  universities  and 
polytechnics (1995-2009). 

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Figure 3.4: Number of higher education institutions by type (1995-2011) 

Source: Ministry of Education and Culture. 

The  missions  of  Finnish  universities  and  polytechnics  are  in  many  ways  complementary: 
Universities  conduct  scientific  research  and  deliver  research-based  education.  Polytechnics 
provide professional  training  with  an  eye  on  labour  market  demands,  and  have  strong  regional 
ties. They, too, conduct research, but with a closer orientation towards regional development and 
non-university working life. 

Figure 3.5 below shows how the  growth of the Finnish higher education system influenced the 
size of institutions, measured by average student number. The figures show that the expansion of 
the system caused an increase in both number and average size of institutions. Polytechnics grew 
rapidly  in  size  in  the  years  up  to  2001;  concurrently  there  was  an  increase  in  the  number  of 
institutions. 

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Figure 3.5: Average size of institutions in student numbers, by HEI type (1995-
2010) 

Source: Ministry of Education and Culture: Higher Education Report (2009/2011) / KOTA / own calculations. 

Finland  has  no  private  HEIs  in  the  sense  of  institutions  held  by  private  entities  financing 
themselves  primarily  through  student  fees  and  other  private  income.  Some  polytechnics  are 
administered  by  private  entities,  but  their  funding  structure  does  not  differ  substantially  from 
public HEIs, i.e. they receive most of their funds from the state.  

3.5  Outreach Practices 

In  the  interviews  carried  out  with  national  experts,  representatives  from  several  HEIs  reported 
that in recent years, an increased emphasis on fostering alumni networks and collaboration with 
partners  from  business  and  industry  –  resulting  in  a  number  of  sponsored  professorships  and 
cooperative  programming  of  courses  –  was  observable.  This  information,  albeit  selectively 
gathered, conforms to trends observed in other country reports of this research. In Finland as in 
most  other  countries, it is difficult  to  find  reflections  of  these  changes  in the  sort  of  aggregate 
data this study uses. 

The  same  expert  was  also  asked  about  changes  in  HEI  governance  and  reported  that  recent 
reforms based on the University Act of 2009 have led to restrictions in the competencies of both 
staff  and  student  representatives,  favouring  a  more  managerial  and  professional  leadership 

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approach.  This  means  that  an  increased  focus  on  user  demand  is  not  reflected  in  terms  of 
organisational participation. 

3.6  Quality and Relevance 

In the interview series conducted for this report, several experts were asked to comment on the 
changing  role  of  quality  and  relevance  considerations  for  Finnish  higher  education.  On 
relevance,  one  interviewee  commented  that  increased  awareness  of  user  demand  was 
incentivised by introducing employability as a criterion in the indicator-based allocation models 
to  universities,  and  that  this  stimulated  HEIs’  motivation  to  take  into  account the  needs  of  the 
labour  market  and  (prospective)  students.  The  same  expert  also  noted  the  government’s 
incentives for HEIs to acquire donations (see Section 1.5) as a starting point for institutions to 
direct more attention towards business and industry as well as alumni. 

An interviewed expert from a major university stated that the institution systematically collects 
feedback from graduates, and from employers offering internships for students, and makes use of 
this information in the development of study programmes. 

National student satisfaction measures are only available for polytechnics, for which the Ministry 
of Education and Culture runs the feedback system OPALA  (see Karelia-University of Applied 
Sciences, 2013). Figure 3.6 charts student satisfaction judgements and relevance measures using 
the  two  following  question  items:  “The  education  provided  by  the  polytechnic  was  competent 
and  of  a  high  quality”  for  satisfaction,  and  “In  your  place  of  work  after  graduation,  you  will 
make use of your Polytechnic studies” for (prospective) relevance. Answers counted in each case 
are “I (strongly) agree” as opposed to “I (strongly) disagree” on a four-tiered scale. 

The graph shows consistently high levels of student satisfaction (86%-87%). An upwards trend is 
visible regarding judgements of relevance between 2007 and 2011: from 73% in 2007 to about 
77%  in  2011.  There  does  not  appear  to  be  a  correlation  between  satisfaction  /  relevance 
judgements and funding per student / student-teacher-rations (see Figures 2.6 / 2.7). 

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Figure 3.6: Student satisfaction with education and judgements on relevance of 
education at polytechnics (2003/04-2009) 

Note: Satisfaction is the percentage of students who agree / strongly agree that ‘the education provided by the 
polytechnic was competent and of a high quality”. Relevance is the percentage that agrees /  strongly agrees that 
“in your place of work after graduation, you will make use of your polytechnic studies”. 
Source: OPALA student survey.  

It is worth repeating here that due to the absence of tuition fees in the Finnish system, there can 
be  no  immediate  correlation  between  student  satisfaction  /  judgements  of  relevance  and 
institutions’  financial  goals.  However,  as  was  described  in  Section  1.4,  state  funding  is  partly 
based  on  number  of  students/graduates,  which  gives  HEIs  an  incentive  to  be  an  attractive 
location  of  study,  a  reputation  which  can  be  earned  through  high  quality  in  teaching.  Some 
indicators  in  the  performance-based  funding  component  refer  directly  to  measures  of  student 
satisfaction and employability. As a consequence, institutions do have an incentive to attain high 
student  satisfaction  and  educational  relevance  in  order  to  maximise  revenues,  although  the 
process  is  mediated  by  the  state.  Experts  interviewed  for  this  study  were  not  unanimous  as  to 
whether the relevant incentives provided by the government are actually strong enough to trigger 
lasting changes in HEIs’ behaviour. 

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3.7  Evaluation 

This chapter investigated whether institutions adapt their behaviour to external incentives to earn 
private funding. Since no unambiguous evidence could be found that such incentives are in force 
for  Finnish  HEIs,  the  results  are  provided  as  a  control  case  for  those  countries  in  which  such 
incentives exist. For Finland, it was found that the discipline structure of Finnish HEIs has not 
changed drastically in the period of investigation. No significant changes in mode of study could 
be determined, either. Changes in diversity in the Finnish higher education sector were obviously 
caused by the expansion of the polytechnics sector, but not by a rising degree of privatisation. 
Where  polytechnics are  concerned,  student  views  on  relevance  and particularly  on  educational 
quality are consistently high and do not seem to be directly influenced by changes in financing 
such as those described in section Chapter 2. 

Overall,  responsiveness  to  user  demand  in  Finnish  higher  education  does  not  appear  to  come 
about  through  a  direct  type  of  coordination  of  demand  and  supply,  as  in  systems  in  which 
institutions are dependent on income through student fees for their economic subsistence. Rather, 
institutions  negotiate  with  the  Ministry  regarding  their  choice  of  programmes  and  number  of 
study places, and are funded accordingly. Efficiency in the provision of higher education is taken 
care  of  to  some  degree  by  the  state  funding  models,  which  take  into  account  output-related 
measures like number of degrees awarded. This is a sort of ‘market emulation’ that can also be 
found in other countries, such as Germany and Austria. One interviewed expert commented that 
this funding structure has actually led to competition between institutions for ‘good’ students, i.e. 
students  who  will  be  likely  to  graduate  and  thus  support  institutions’  claims  for  funds  in  the 
negotiations with the Ministry. 

Although  Finnish  HEIs  are  often  described  as  autonomous  organisations,  some  interviewed 
experts  pointed  to  certain  restrictions  which  make  it  difficult  for  HEIs  to  increase  their 
responsiveness  to  user  demand:  Institutions  are  regulated  with  respect  to  their  educational 
responsibilities / educational profiles, the types  of programmes they may  offer, the duration of 
the  programmes,  the  language  in  which  these  programmes  are  taught,  and  their  fee  policy. 
Another interviewed expert took a different view, stating that despite these restrictions, HEIs still 
have sufficient freedom to react to user demand. 

Finally, it should be pointed out that responsiveness to user demand is not only brought about by 
financing  measures.  The  Finnish  higher  education  system  is  very  flexible  in  terms  of  students 
interrupting their studies between and within study programmes to  gain work experience, be it 
through internships or regular jobs. This naturally leads to a certain permeability between higher 
education and professional life benefiting the interlinkage between the sectors  even though it is 
not realised through direct financial contributions to HEIs. 

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4.  HYPOTHESIS C: INCREASING PRIVATE FUNDING 

HAS A NEGATIVE EFFECT ON PARTICIPATION 

This  chapter  looks  at  data  relevant  to  Hypothesis  C,  which  states  that  as  private  funding 
increases,  costs  increase  to  students  and  their  families,  which  in  turn  may  have  an  impact  on 
quantitative student demand and on the composition of the student body.  

In order to assess this, it is important to look at:  

 

the real costs to students, including direct and indirect support provided by the state, which 
may discount the gross costs 

  how tuition fees are organised: Who pays and who does not pay? When do you pay – as a 

 

student or as a ‘successful’ graduate (with a well-earning job)? 
the  overall  trend  of  participation  rates  in  the  country  in  question,  i.e.  expanding,  stable  or 
contracting? 

Despite the fact that no tuition fees are charged in Finland, it is possible to investigate the effects 
of changes to net costs.  

4.1  Students’ Costs for Higher Education 

Like Hypothesis A,  Hypothesis C presupposes that private funding has increased, which could 
not be confirmed for Finland, as discussed in Chapter 2. As stated before, the findings presented 
in this chapter will help to provide a baseline where students do not share directly in covering the 
cost of education. 

Student fees and student costs 

This section focuses on changes in private costs to students. Table 4.1 gives an overview. Tuition 
fees, a large cost item in other countries, were not relevant for students in Finland in the period 
of  investigation.  Table  4.1  shows  that  costs  of  living  for  students  have  increased  considerably 
over  a  ten  year  period  due  to  rising  costs  of  accommodation,  food  and  clothing.  The  overall 
increase in costs between 2000 and 2009 is 20% in constant 2011 euros. 

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Table 4.1: Annual student costs in euros, by cost category (2000-2009) 

Accomm-
odation 

Books 

Clothing  Transport 

Food 

Other 

Total 

Relative 
change 
from period 
before 

2000 
2003 
2006 
2009 

3370 
3530 
3830 
4010 

240 
270 
270 
130 

490 
690 
670 
750 

670 
690 
670 
630 

1580 
2060 
1880 
2510 

1640 
1910 
2550 
1590 

7990 
9150 
9870 
9620 

+14.5% 
+7.8% 
-1.5% 

Note: Student cost is differentiated by sector (university vs. polytechnic) for 2000 in source data. The data given 
here represent the arithmetic mean. Constant prices (2011). 
Source: Opiskelijatutkimus (National student survey) 2000-2009 / own calculations.  

In  the  next  two  sub-sections  it  will  be  investigated how  public  student  grant  and  loan  systems 
developed in the period of investigation. 

Student Financial Assistance 

Student  assistance  in  Finland  consists  of  six  components:  study  grants,  housing  supplements, 
meal  subsidies,  interest  subsidies  for  study  loans,  tax  deductions  related  to  student  loans  and 
government guarantees for student loans. All of these are administered by Kela. 

  Study  grants  are  provided  to  cover  study-related  costs  of  active  students.  There  is  a 
standard  amount  of  298  euros per  month  (2013).  For  students  living  with  their  parents, 
the  amount  is  lower  (122  euros  basic  amount  plus  potentially  parental  income-related 
increments in 2013)  (Kela, n.d.), but since the vast majority of students live away from 
their parents this only applies to a small group. The grants are subject to means-testing: 
Students with income beyond a certain threshold are not eligible, nor are students beyond 
the standard period of study. Grants of 170 euros or more are subject to income taxation 
for students who have other sources of income besides the grant. 

  Housing  supplements  are  granted  to  students  living  in  rented  or  right-of-occupancy 
accommodation.  Their  share  is  fixed  at  80%  of  the  rent,  with  a  maximum  monthly 
amount of 202 euros. 

  Meal discounts are also granted by Kela. Student restaurants offer meals at full price and 
discount price. Kela refunds the difference between the full price and the discount price 
to the operators of student restaurants. 

  Assistance  with  loan  interests  is  an  income-related  subsidy.  A  graduate’s  gross  income 
must not exceed 1,195 euros per month in order to be eligible for this type of financial aid 
(the amount is higher for persons having dependent children). 

  Tax deductions on student loans are provided for graduates with a debt exceeding 2,500 
euros  at  the  time  of  obtaining  a  degree.  It  is  conditional  on  graduating  in  the  regular 
period of study. The deduction is equal to 30% of the qualifying debt that exceeds 2,500 
euros. This type of assistance was introduced in 2005. 

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  Government  guarantees  for  student  loans  (issued  by  a  third  party):  The  government 
guarantees the refunding of loans (of up to 300 euros per month) to the loan issuer even if 
the client will be insolvent. Every recipient of a student grant is eligible for this guarantee 
unless there is a record of previous loan defaults. 

Non-repayable Assistance 

Figure 4.1 shows the amount of public expenditure for each of these types of assistance (except 
expenditures  on  defaulted  loan  repayments).  Figure  4.2  shows  the  numbers  of  individuals 
benefitting from grants and subsidised room and board. 

Figure 4.1 shows that public expenditure on student financial support increased in the period of 
investigation. The most rapid growth took place between 1998 and 2001, caused primarily by an 
increase in expenditure on student grants. After that, the growth slowed  with almost no change 
from 2003 to 2006. There was a decline between 2006 and 2008, followed by a recovery in the 
years  2009-2010.  Most  of  the  time,  study  grants  accounted  for  about  60%  of  expenditure  on 
student support, and housing subsidies for another 20%. The number of recipients of grants and 
housing  subsidies  (shown  in  Figure  4.2)  roughly  parallels  the  pattern  in  Figure  4.1. 
Approximately  two  thirds  of  all  students  receive  grants,  and  one  in  two  receives  housing 
supplements.  

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Figure 4.1: Public expenditure on non-repayable student assistance (1998-2010) 

Note: Constant prices (2011). 
Source: Kela55 (grants, meal and housing subsidies) / Ministry of Education and Culture, Finnish Tax Administration: 
Report  on  deductions  (Opintolainavähennyksen  arviointi)  (study  loan  repayments,  tax  deductions)  /  own 
calculations. 

55 Statistical data base provided by Kela is abailable at http://www.kela.fi/web/en/statistics 

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01002003004005006007001998199920002001200220032004200520062007200820092010million eurosGrantsSubsidised room & boardMeal subsidy for studentsGovernment study loan repaymentsTax deductions (projected maximum amounts)   
 
                                                 
 
 
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Figure 4.2: Number of student grant and housing subsidy recipients (1998-2010) 

Source: Kela / own calculations. 

Loans 

Data on the amounts of student loans paid and their incidence are not available from issuers of 
loans.  However,  Kela  provides  data  on  the  incidence  and  amounts  of  student  loan  debts  at 
graduation. These can be used as a proxy for the incidence of loans among Finnish students. 

Figure 4.3 shows an increase in average debt at graduation for both universities and polytechnics. 
The  increase  started  after  2006  in  polytechnics  and  in  2008  in  universities.  The  share  of 
graduates with debt does not show this pattern: The shares in university graduates decreased by 
about 6% between 2002 and 2007 (from 42% to 36%) and increased again by approximately the 
same amount between 2008 and 2011. The share of polytechnic graduates with loan debts ranged 
from 42.8% (2002) to 38.7% (2010), showing a moderate decrease. 

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020.00040.00060.00080.000100.000120.000140.000160.000180.000200.0001998199920002001200220032004200520062007200820092010recipientsGrantsSubsidised room and board 
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Figure 4.3: Average amount and incidence of student loan debt at graduation 
(2002-2010) 

s
o
r
u
e

9 000

8 000

7 000

6 000

5 000

4 000

3 000

2 000

1 000

0

40%

35%

30%

25%

20%

15%

10%

5%

0%

2002

2003

2004

2005

2006

2007

2008

2009

2010

Average amount universities

Average amount polytechnics

Incidence universities (right axis)

Incidence polytechnics (right axis)

Note: Constant consumer prices (2011). 
Source: Kela / own calculations.  

Taking out loans appears to be a much more common way of financing studies in Finland than in 
other countries, such as Austria or Portugal, where the share of students making use of loans is 
marginal.  While  student  costs  have  increased  (see  Table  4.1),  the  incidence  of  borrowing  has 
declined,  although  the  average  amount  of  debt  at  graduation  has  increased  for  those  who  do 
borrow. 

Total student costs 

Figure  4.4  summarises  findings  of  the  above  sections  by  comparing  student  costs  before  and 
after the subtraction of student grants. Costs minus loans are approximated by dividing debts at 
graduation (Figure 4.3) by the average duration of studies in years (Figure 5.4). The graph shows 
an overall increase in student costs, with a maximum in 2006. Between 2000 and 2009, average 
student cost rose by 19.7% (17.5% when student assistance is subtracted). The pattern for costs 
minus grants and loans follow that of student costs closely.  In all four years represented in the 

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chart, student assistance accounted, on average, for between 17% and 18% of total student cost. 
This also means that the public-private cost-sharing balance barely shifted with respect to student 
costs.  Student  loans  covered  another  13%-16%  of  total  costs  for  university  students  and  18%-
22% for polytechnic students.  

Figure 4.4: Average annual student costs (2000-2009) 

Note: Constant prices (2011). 
Source: Kela / own calculations.  

Relative earnings 

Increasing  cost  is  a  potential  incentive  against  choosing  higher  education,  but  can  be 
counterbalanced  by  increasing  earnings  after  graduation.  The  OECD’s  ‘Education  at  Glance’ 
series specifies relative earnings of populations with income. The reference case (=value 100) are 
the earnings from employed persons with a secondary or post-secondary, non-tertiary education. 
Figure 4.5 shows the results for employed persons with tertiary education. The graph shows that 
the  differences  in  average  income  between  persons  with  a  tertiary  degree  and persons  with  an 
upper secondary degree narrowed between 1999 and 2003: The relative advantage of a tertiary 
degree holder was 153 in 1999 and 148 in 2003 (100 being the average earnings of a person with 
an  upper  secondary  qualification).  After  2003  the  difference  became  more  stable,  it  narrowed 
again  in  2006-2008  and  increased  in  2009.  Despite  a  slight  overall  downward  trend,  the 
differences in earnings between persons with and without a degree are still considerable. It thus 
appears  unlikely  that university  entrance  qualification  holders  will  be  discouraged  from  higher 
education based on the pattern displayed in Figure 4.5, even when the price increases shown in 
Figure 4.4 are taken into account. 

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02,0004,0006,0008,00010,00012,0002000200320062009eurosstudent costminus grantsminus loans polytechnicminus loans university 
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Figure 4.5: Relative earnings of persons with a tertiary education (1999-2009)  

Note:  Data  indexed  to  earnings  of  a  person  with  secondary  and  post-secondary,  non-tertiary  education  (=100). 
Comparison based on 25-64 year-old employed persons. 
Source: OECD Education at a Glance. 

4.2  Participation Rates 

A key question addressed in this research is whether changes in cost-sharing have had an impact 
on  transition  rates  from  secondary  education  and  on  overall  participation  rates.  In  the  Finnish 
case, the issue is whether the rising cost of living for students as documented in Figure 4.4 has 
had  a  negative  impaction  on  participation.  Figure  4.6  maps  these  rising  costs  against 
participation  rates  (repeated  from  Figure  1.2).  The  data  show  that  there  is  no  clear  correlation 
between the cost to students and higher education participation: The values in both dimensions 
increased  between  2000  and  2003  and  decreased  between  2006  and  2009,  while  an  inverse 
relationship is visible between 2003 and 2006. It can thus not be  concluded that rising costs of 
living  for  students  led  to  declining  participation  in  higher  education  in  Finland  or  vice  versa 
based on these data. 

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Figure 4.6: Participation in higher education vs. annual student cost of living 
(2000-2009) 

Source: Kela / own calculations. 

4.3  Composition of the Student Body 

Figures  4.7  and  4.8  graph  the  social  composition  of  Finnish  students.  They  use  the  highest 
educational  degree  of  a  student’s  father  as  an  indicator  of  social  status.  At  first  sight,  both 
Figures  4.7  and  4.8  show  a  tendency  to  increasing  social  selectivity  and  decreasing  social 
mobility  in  higher  education,  since  the  share  of  students  whose  father  has  not  attained tertiary 
education is decreasing. The data show that in universities, there is a shift from lower to higher 
social  background in  the  student population,  which  for  the  most part  took  place between  2000 
and  2003.  In  those  years,  the  share  of  students  from  lower  social  backgrounds  (father  with  no 
secondary  education  degree)  decreased  by  6%,  while  the  share  of  students  from  higher  social 
backgrounds (father with a tertiary degree) increased by the same amount. The share of students 
from  intermediary  backgrounds  (father  with  a  secondary  but  no  tertiary  degree)  decreased 
between 2000 and 2003 but increased again thereafter. 

In polytechnics, the trend is the same, but it is more marked than in universities. Between 2000 
and 2010, the share of students from lower social backgrounds (father with no secondary degree) 

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National Report for Finland 

decreased  from  39%  to  23%,  while  the  share  of  students  from  higher  backgrounds  increased 
from 12% to 25%. 

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Figure  4.7:  Social  composition  of  Finnish  university  students  by  educational 
background of father (2000-2010) 

Note: 2000: No data for category “other”. 
Source: Ministry for Education and culture: National Student Surveys 2000 / 2003 / 2006 / 2010. 

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0%5%10%15%20%25%30%35%40%45%2000200320062010no secondary degreesecondary degreetertiary degreeother 
 
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Figure  4.8:  Social  composition  of  Finnish  polytechnic  students  by  educational 
background of father (2000-2010) 

Note: 2000: No data for category “other”. 
Source: Ministry for Education and Culture: National Student Surveys 2000 / 2003 / 2006 / 2010. 

In  order  to  test  the  assumption  of  increasing  selectivity  in  HEIs,  one  can  relate  the  shares  of 
students of different social groups to the social composition of the overall population. The latter 
is  shown  in  Figure  4.9  below.  Most  importantly,  we  see  that  the  educational  status  of  the 
population aged  25-64,  which includes  most  parents  of  students  in  our period  of  investigation, 
advanced  between  2000  and  2010.  The  decline  in  persons  with  no  secondary  school  leaving 
certificate  (10  percentage  points  between  2000  and  2010)  was  compensated  in  roughly  equal 
proportions by growing shares of persons with a secondary, non-tertiary degree and persons with 
a tertiary degree.  The decline in the share of persons  with no secondary  degree is faster in the 
total  population  than  among  fathers  of  university  students,  but  slower  than  among  fathers  of 
polytechnic students. This means that selectivity in polytechnics was higher than in universities. 
The causes of this development cannot be investigated further here. 

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Figure 4.9: Social composition of Finnish population aged 25-64, in percentages 
of total population (1995-2010) 

Source: OECD Education at a Glance / Eurostat (data before 2000). 

Issues of equity of the Finnish higher education system are also discussed in Davies et al. (2009), 
where  it  is  asserted  that  “large  inequalities  in  access  to  tertiary  education  by  social  origin  still 
persist  in  Finland“.  According  to  the  Ministry  of  Education  (2005,  p.  50),  chances  of 
participating  in  higher  education  were  ten  times  as  high  for  young  persons  (aged  20-24)  from 
academic  homes  than  for  persons  from  non-academic  backgrounds  throughout  the  1980s  and 
1990s, and the gap had narrowed to a relative advantage of seven-fold in 2000. These numbers 
show clearly that free higher education does not make social equity in the student population a 
matter  of  course:  “Overall,  as  regards  the  family  background  of  the  20-to-24-year-olds,  the 
situation  still  is  that  the  offspring  of  fathers  with  tertiary  education  go  to  university,  while  the 
offspring  of  untrained  fathers  find  fulltime  jobs  or  seek  other  training”  (Ministry  of  Education 
Finland, 2005, p. 50). 

4.4  Completion Rates 

Figure 4.10 shows completion rates by sector. In polytechnics, completion rates are fairly stable, 
ranging from a low of 58% in 2004 to a high of 61% in 2007. In universities, completion rates 
are generally lower (51% on average), and a downward trend is visible between 2008 and 2011.  

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0%5%10%15%20%25%30%35%40%45%50%1995199619971998199920002001200220032004200520062007200820092010no secondarysecondary / post-secondary non-tertiarytertiary 
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Figure 4.10: Completion rates by sector (2004-2011) 

Note:  For  universities  the  figures  specify  the  percentage  of  students  who  have  completed  their  studies  within 
seven years after enrolling. For polytechnics the figures specify the percentage of students who have completed 
their studies within five years after enrolling. 
Source: Ministry of Education and Culture. 

4.5  Evaluation 

The  aim  of  this  chapter  was  to  investigate  whether  increasing  private  funding  has  a  negative 
effect  on  participation.  In  the  case  of  Finland,  the  premise  of  Hypothesis  C,  i.e.  that  private 
funding  has  increased  is  true  only  with  respect  to  student  cost  of  living  (not  with  respect  to 
tuition itself). 

Gross costs to students increased by 20% between 2000 and 2009, although this change did not 
influence the public/private cost-sharing balance, because public student assistance increased in 
parallel  with  student  costs.  The  increase  in  student  costs  was  not  due  to  the  introduction  or 
increase of tuition fees, but due to increases in spending on accommodation, food and clothing. If 
the  available  data  on  student  loans  are  taken  into  account,  students’  out-of-pocket  costs  were 
only  slightly  higher  in  2009  than  in  2003.The  available  data  on  participation  did  not  reveal  a 
negative correlation between rising studying costs and propensity to enrol at an HEI. Transition 
rates increased in times when student costs went up and decreased in times when student costs 
went down. 

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Changes  in  the  composition  of  the  student  body  were  investigated  using  information  on  the 
educational  background  of  the  father.  It  was  shown  that  the  social  composition  of  the  student 
body  changed  towards  larger  shares  of  students  from  higher  social  backgrounds,  and  that  this 
change  is  mirrored  by  changing  levels  of  educational  attainment  in  the  larger  population.  The 
literature  suggests  that  the  selectivity  of  the  Finnish  (higher)  education  system  reduced  in  the 
period  of  investigation, but  it  is  still  clearly  visible  when  looking  at  the  likelihood  of  children 
from (non-)academic backgrounds going to university or not. 

The  relatively  short  periods  of  time  for  which  data  on  completion  rates  are  available  make  it 
impossible  to  relate  them  to  changes  in  student  costs.  The  stability  in  completion  rates  for 
polytechnics students (2004-2011) make it seem unlikely that the recent drop in completion rates 
for university students (2008-2011) is connected to cost-related factors. 

Concluding this chapter, it can be said that changing costs for students in Finland did not appear 
to have strong effects in the dimensions investigated under Hypothesis C. 

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National Report for Finland 

5.  HYPOTHESIS D: INCREASING PRIVATE FUNDING 
AFFECTS STUDENT CHOICE OF HOW OR WHAT TO 
STUDY 

This  chapter  looks  at  data  relevant  to  Hypothesis  D,  which  states  that  as  private  funding 
increases,  costs  increase  to  students  and  their  families,  which  in  turn  will  have  an  impact  on 
students’ choice of how and what to study (but not necessarily on the share of students studying). 
Accordingly, this section looks at these topics: have student age, location or field of study and 
time to completion changed over time in relation to cost-sharing? 

Once again, Finland, which did not undergo many changes related to cost-sharing in the period 
of  investigation,  will  be  looked  at  as  a  reference  case  for  other  jurisdictions  which  developed 
more dynamically in this respect. 

5.1  Student Study Patterns 

This  section  investigates  changes  in  study  patterns.  Two  aspects  are  studied  here:  Full-time 
versus part-time studying and age at entry into higher education. 

Full-time and part-time students 

While  there  is  no  official  full-  /  part-time  student  status  distinction  in  Finland,  the  national 
student  surveys  ask  students  about  their  self-assessed  status  as  full-  or  part-time.  This 
information is summarised in Figure 5.1 below. The data show that the share of full-time versus 
part-time students remains relatively constant between 2000 and 2009. The decrease in the share 
of part-time students is mostly due to the introduction of the category ‘other’ (not classified) in 
2003. 

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National Report for Finland 

Figure 5.1: Distribution of full-time vs. part-time students (2000-2009) 

Note: Results based on survey respondents’ own understanding of their status. 
Source: Ministry of Education and Culture: National Student Survey 2000/2003/2006/2009.  

Distribution of students by age 

The following graph shows changes in the ‘best four years’ student group, i.e. the age group of 
students in which there are most enrolments. In Finland this is the group of students aged 21-24. 
The  graph  shows  that  the  best  four  years-group  changed  its  composition  somewhat  over  the 
years: While the share of younger students (age 21 and 22) declined slightly (particularly in the 
early 2000s), the share of older students (age 23 and 24) increased slightly. Overall, this change 
is not very salient, however. 

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Figure 5.2: Distribution of students in ‘best four years’ (1998-2010) 

Source: UOE data / Statistics Finland / own calculations. 

Of note is the fact that mature students represent a relatively large share of the Finnish student 
population. Data from the national statistical office show that around 30% of all students are 30 
or  older.  The  group  of  students  aged  40  and  older  grew  quickly  in  the  period  of  investigation, 
from  22,000 in 1998 to  over  35,000 in 2010,  making  up  11.6%  of  all  students in  2010  (1998: 
8.7%). 

5.2  Location of Study 

This section investigates mobility behaviour. The available data pertain to the number of Finnish 
students going abroad to study while receiving study assistance.56 Figure 5.3 shows a downward 
trend in the number of students studying abroad until about 2004, then a leveling off until about 
2007at  which  point  the  percentage  of  students  studying  abroad  began  to  increase.  One  may 

56 Finnish students studying abroad are eligible for study grants if they spent at least two years in Finland in the five 
year period preceding their studies. 

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National Report for Finland 

conclude from this that rising student costs (see Section 4.1) did not cause Finnish students to go 
abroad – which of course must be considered against the backdrop of a tuition-free country. In 
addition, as was shown in Chapter 3, accessibility and diversity of provision in Finland appear to 
have kept up with the ever-rising student demand, so that these structural features do not act as 
‘push’ factors, either. 

Figure 5.3: Share of Finnish students studying abroad (1998-2010) 

Source: Kela / own calculations.  

To get an idea of mobility behaviour inside Finland, one can look at the share of students living 
with their parents. This number is very low in Finland. In the EUROSTUDENT I-IV data sets, 
Finland  has  consistently  been  the  country  with  the  lowest  share  of  students  living  with  their 
parents (6% in 2000 and down to 4% in 2011). This is certainly related in parts to the relatively 
generous  public  housing  supplements.  The  EUROSTUDENT  data  further  show  that increasing 
costs  of  living  (see  Chapter  4)  did  not  result  in  a  decline  in  student  mobility,  i.e.,  for  Finnish 
students staying with their parents has not been a popular scheme to save costs.  

5.3  Field of Study 

This section investigates changes in field of study from the student perspective. To do this, it is 
helpful to consider not only actual enrolment, but also application data. In Finland, HEIs handle 
admission autonomously (see Section 1.6). For universities, data on numbers of applications are 

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0.0%1.0%2.0%3.0%4.0%5.0%6.0%1998199920002001200220032004200520062007200820092010 
National Report for Finland 

available  and  will  be  used  because  they  are  more  indicative  of  actual  student  demand.  For 
polytechnics, no such data are available, and enrolment data will be used (repeated from section 
3.1). 

Figure  5.4  shows  that  in  the  university  sector,  a  decline  in  demand  for  humanities  is  visible, 
which is for the most part to the benefit of social sciences. Natural sciences first gained then lost 
some popularity, whereas there seems to be a recent trend in favour of engineering. 

Figure 5.4: Shares of applications by field of study, universities (1995-2009) 

Source: KOTA / Ministry of Education and Culture. 

In  polytechnics,  shown  in  Figure  5.5,  technology,  communications,  and  transport;  social 
services,  health,  sports;  and  social  sciences,  business  and  administration  together  account  for 
about three quarters of all enrolments, highlighting the different orientations of universities and 
polytechnics.  Social  services,  health  and  sports  as  well  as  social  sciences,  business  and 
administration gained in importance in recent years, whereas no clear tendency is visible for the 
other fields. 

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0%10%20%30%40%50%60%70%80%90%100%199519961997199819992000200120022003200420052006200720082009HumanitiesSocial SciencesNatural SciencesEngineering and TechnologyMedical SciencesAgricultural Sciences 
National Report for Finland 

Figure 5.5: Enrolments by field of study, polytechnics (1997-2010) 

Source: Vipunen / KOTA / Ministry of Education and Culture / Statistics Finland. 

5.4  Time-to-Completion 

The aim of this section is to consider whether changes in cost-sharing have an impact on times to 
completion. Figure 5.6 shows the average time to degree for universities and polytechnics. While 
average  time  to  completion  for  polytechnics  was  level  throughout  the  years  1998  to  2010,  the 
average  for  university  students  increased  by  one  year  between  2005  and  2008  and  then 
declined.57 The drop is presumably due to the end of the transition period to the new Bachelor-
Master-system. The actual effect may be overestimated as the source data only specifies time-to-
degree in half-year increments.  

57 The Bologna study reforms are not reflected in this graph due to the fact that the Master degree is de facto still the 
basic degree in university education, whereas the Bachelor degree is not widely regarded as a degree with which one 
can enter the labour market. Polytechnic education was focussed on basic degree programmes before and after the 
Bologna reform. 

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0%10%20%30%40%50%60%70%80%90%100%19971998199920002001200220032004200520062007200820092010Technology, Communications and TransportSocial Services, Heath and SportsSocial Sciences, Business and AdministrationCultureTourism, Catering and Domestic ServicesNatural SciencesNatural Resources and the EnviromentHumanities and Education 
                                                 
 
National Report for Finland 

Figure 5.6: Average time-to-degree in Master programmes (universities) and 
undergraduate programmes (polytechnics) (1995-2010) 

Note:  Universities:  Median  graduation  time  in  Master  degrees  (all  enrolled  students).  Polytechnics:  Median 
graduation time of traditional undergraduate students. 
Source: Statistics Finland/ Ministry of Education and Culture.  

5.5  Evaluation 

The  aim  of  this  chapter  was  to  investigate  whether  increasing  private  funding  has  effects  on 
study behaviour in several different dimensions. As was shown in Chapter 4, there is evidence 
that student costs went up in the period of investigation, particularly in the years 2000-2006. 

Study patterns did not appear to have changed as far as the full- / part-time division is concerned. 
About 80% of Finnish students study full-time, the remaining share studies part-time or do not 
see themselves as belonging to either one of these categories. 

There was no indication of Finnish students leaving the country to avoid rising costs, either. On 
the contrary, the share of Finnish students studying abroad clearly decreased between 1998 and 
2010. Available data do not show a tendency for more students to live with their parents in order 
to save costs – an observation which must be assessed with the well-established system of public 
housing subsidies in mind. 

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National Report for Finland 

Enrolment  by  field  turned  out  to  be  relatively  stable,  with  no  clear  indications  of  students 
switching  to  more  ‘profitable’  subjects  as  a  result  of  rising  study  costs.  Changes  in  study 
behaviour  due  to  differential  programme  costs  are  not  a  relevant  aspect  in  Finland  due  to  the 
absence of tuition fees. 

The  question  of  whether  time-to-completion  changes  as  a  result  of  increasing  private  funding 
could  not  be  answered  positively  based  on  the  available  data:  For  polytechnics,  time-to-
completion  remained  constant  between  1998  and  2010,  whereas  in  universities,  no  correlation 
can be discerned between changes in student costs and changes in time-to-completion. 

In summary, it can be stated that student behaviour in the dimensions investigated in this chapter 
is marked by stability rather than change.  

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6. 

CONCLUSION 

As  was  pointed  out  in  Chapter  1,  the  Finnish  higher  education  system  saw  an  expansion  not 
unlike that of other countries studied in this project. However, in the Finnish case this expansion 
was not answered with an increase in the share of private funding, but with increases in public 
funding.  As  was  shown  in  Chapter  2,  there  is  evidence  that  even  funding  per  unit  increased 
concurrently  with  the  growth  of  the  system  as  a  whole.  However,  the  largest  part  of  the 
enrolment growth of the 1990s was accommodated by the polytechnic sector, and, as Chapter 2 
has  shown,  education  in  this  sector  is  less  costly  than  in  universities.  Thus,  in  some  sense,  an 
important  element  in  Finland’s  answer  to  the  massive  expansion  of  higher  education  was  not 
cost-sharing,  but  cost  containment.  That  said,  institutions  did  receive  minor  incentives  to 
increase  private  funding  in  state  funding  models.  There  have  been  reforms  to  give  HEIs  more 
autonomy. However, they did not result in important increases in private revenues, but appear to 
be  more  connected  to  governance  and  academic  programming.  Accordingly,  it  was  found  that 
responsiveness  of  Finnish  HEIs  is  not  primarily  a  matter  of  direct  reactions  to  user  demand. 
Rather,  it  is  mediated  by  bilateral  negotiations  with  the  Ministry  of  Education,  which  is 
responsible for higher education planning, including investigations into labour market demands. 

Student costs did increase in the period of investigation. However, these costs are largely general 
living costs not specific to students. Also, state assistance to students increased in parallel with 
rising living costs, leaving the cost-sharing balance unchanged in this area. No direct evidence 
was found that rising student costs deter (potential) students from studying.  

No clear indications could be found that students have changed their study behaviour in terms of 
choice  of  programme,  mode  of  study,  time-to-completion  or  mobility  as  a  result  of  changes  in 
private costs. 

Summing  up  this  report,  the  Finnish  higher  education  system  has  coupled  expansion  of  the 
system  with  increasing  public  investment,  and  with  the  establishment  of  a  binary  system  as  a 
landmark  decision.  Within  this  context,  increasing  private  revenue  has  not  been  considered  a 
policy option of top priority. The Finnish policy setting prefers to invest directly in students and 
recoup costs through income tax for all taxpayers.  

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REFERENCES 

Davies, J., Weko, T., Kim, L., & Thulstrup, E. (2009). OECD Tertiary Education Review 

Finland. Paris: OECD Publishing. Retrieved from http://www.oecd.org/education/skills-
beyond-school/37474463.pdf 

EUA. (n.d.). University autonomy in Europe: Finland. Retrieved March 25, 2014, from 

http://www.university-autonomy.eu/countries/finland/. 

Karelia-University of Applied Sciences. (2013). OPALA - Student Feedback System for 
Polytechnics. Retrieved from http://opala.pkamk.fi/OpalaPublicReport/main.do 

Kela. (n.d.). Study Grant. Retrieved August 08, 2013, from http://www.kela.fi/web/en/financial-

aid-for-students_study-grant 

Leitner, K.-H., Ecker, B., & Steindl, C. (2011). Finanzierungsmodelle universitärer Lehre: 
Internationale Beispiele, Erfahrungen und mögliche Strategien für Österreichs 
Universitäten. Endbericht. Wien: AIT Austrian Institute of Technology GmbH. 

Ministry of Education Finland. (2005). OECD thematic review of tertiary education - Country 

Background report for Finland. Helsinki: Author. 

OECD. (2002). Frascati Manual: Proposed Standard Practice for Surveys on Research and 

Experimental Development. Paris: OECD Publishing. 

Opetus- ja kulttuuriministeriö. (n.d.). Vipunen - opetushallinnon tilastopalvelu. Retrieved from 

http://vipunen.csc.fi/fi-fi/ohjeet/Pages/default.aspx 

Räty, T., Aaltonen, J., & Kirjavainen, T. (2008). Tuloksellisuuden ja. Tuottavuuden mittaus. 
Ammattikorkeakouluissa. Valtion taloudellinen tutkimuskeskus. Helsinki: Government 
Institute for Economic Research. Retrieved from 
http://www.vatt.fi/file/vatt_publication_pdf/t137.pdf 

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APPENDIX: LIST OF INTERVIEWED EXPERTS 

Name 
Marita Aho 

Position / Affiliation 
Senior advisor 
The Confederation of Finnish Industries (EK) 

Esa Hämäläinen 

Director of Administration 
University of Helsinki 

Interviewed 
August 2013 

September 2013 

Seppo Hölttä 

Professor of Higher Education Administration and Economy 
School of Management 
University of Tampere 

October 2013 

Jarmo Kallunki 

Education policy officer 
The National Union of University Students in Finland 

August 2013 

Helka Kekaläinen 

Secretary General 
Finnish Higher Education Evaluation Council 

Harri Melin 

Vice Rector for Education and International Affairs 
University of Tampere 

Hannu Sirén 

Director General 
Department for Higher Education and Science Policy 
Ministry for Education and Culture 

Tapio Varmola 

Rector 
Seinäjoki University of Applied Sciences 

September 2013 

October 2013 

August 2013 

September 2013 

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National Report for Germany 

GERMANY

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1. 

INTRODUCTION 

1.1  Overview of Higher Education in Germany 

The  Federal  Republic  of  Germany  has  a  population  of  roughly  80.2  million.  The  republic  is a 
federation  of  sixteen  states,  called  Länder  (singular  Land),  five  of  which  were  joined  to  the 
Federal  Republic after  the  breakdown  of  the  German  Democratic  Republic in  1990.  Education 
policies  are  placed  under  the  responsibility  of  the  Länder;  consequently,  all  public  higher 
education institutions (HEIs) are owned by the Länder.  

The federal government’s influence on matters of higher education has changed over the years. 
In 2006, an amendment to the country's Basic Law (its constitution) was passed limiting federal 
state support for HEIs to include only scientific projects and research. Consequentially, the new 
amendment  explicitly  excluded  permanent  institutional  funding.  Nevertheless  federal  funding 
does  play  a  role  in  supporting  German  higher  education  and  so  the  federal  government  has 
retained some influence on the higher education system as a whole. 

The  German  HE  system  is  dominated  by  the  public  sector.  A  basic  distinction  can  be  made 
between  general  /  technical  universities  (Universitäten  /  Technische  Universitäten)  on  the  one 
hand and universities of applied sciences (Fachhochschulen) on the other hand. Presently, there 
are 88 public general/technical universities and 104 public Fachhochschulen. While the former 
have the authority to award Ph.D. degrees and a stronger research focus, the latter do not award 
Ph.D. degrees, and have a stronger focus on teaching and applied research. Academies of the arts 
(Kunst-  und  Musikhochschulen)  and 
(Philosophisch-theologische 
Hochschulen)  are  usually  considered  part  of  the university  sector.  This  is  also  the  case  for  the 
few separate teacher training colleges (Pädagogische Hochschulen). Therefore, these three types 
of HEIs will be subsumed under the university sector in the statistics below.  

theological  colleges 

Traditionally, the German higher education landscape has been characterized by a high level of 
homogeneity. A university degree has typically been regarded as having  equal value regardless 
of  the  institution  from  which  it  was  obtained.  A  stronger  degree  of  institutional  differentiation 
has  been  a  recent  policy  goal,  and  a  number  of  initiatives  have  been  launched  in  recent  years 
with the explicit aim of giving individual HEIs more distinctive profiles. 

Up until the onset of the Bologna reform, the most common university degrees were the Diplom 
(mostly for programmes in natural science, engineering and social sciences), the Magister Artium 
(for degrees in arts and humanities), professional degrees with state examinations (Staatsexamen 
–  for  degrees  in  medicine,  pharmacy,  law  and  teaching  professions)  and  the  doctorates.  The 
Bologna reform was embraced by all states beginning in the early 2000s, and study programmes 
were progressively altered to align with the unified Bachelor and Master system (except for the 
Staatsexamen).  In  2010  60%  of  students  were  studying  in  a  Bachelor  or  Master  programme 

 
National Report for Germany 

(Hochschulrektorenkonferenz, 2011, p.21), and 81% of all study programmes were Bachelor or 
Master programmes (Winter, 2011, p. 233). 

There are presently about 40 Church-maintained and 100 private HEIs in Germany. Although the 
private sector has been increasing over the last twenty years, the private HEIs operating in 2009 
only accommodated about 3.9% of all German students  (Werner & Steiner, 2010, p. 484). The 
distribution  of  private  HEIs  across  Länder  is  uneven:  North  Rhine-Westphalia,  Berlin  and 
Hamburg  are  examples  of  Länder  with  a  high  share  of  private  institutions,  whereas  eastern 
Länder such as Thuringia and Mecklenburg-Vorpommern have a low share. Reasons for this are 
geographical conditions as well as differences in legislation concerning the operation of private 
HEIs. 

Further education programmes are offered as part-time (for people in employment), and full-time 
programmes  by  both  public  and  private  HEIs.  Some  of  them  offer  regular  degrees  (mostly 
Master degrees), others do not. 

Germany  also  has  an  important  non-university  research  sector  organized  in  a  number  of 
institutional  networks  funded  conjointly  by  the  federal  government  and  the  Länder.58  These 
institutions  conduct  both  basic  and  application-oriented  research.  They  will  not  be  further 
considered in this report. 

A  survey  by  the  European  University  Association  (EUA)  shows  that  the  Länder  differ  with 
respect  to  the  financial  autonomy  granted  to  HEIs:  There  were  differences  with  respect  to  fee 
policies, but also with respect to whether HEIs are allowed to borrow money or keep surplus, and 
with respect to the length of funding cycles.59 The survey,  which studies HEI autonomy in the 
four dimensions of organisational, financial, staffing and academic affairs, looks at three German 
Länder  and  shows  that  financial  autonomy  is  relatively  the  least  developed  dimension  of 
autonomy. 

1.2  Key Higher Education Stakeholders 

Due  to  the  country’s  federal  structure,  governance  structures  in  German  higher  education  are 
fairly  complex.  The  principal  actors  of  higher  education  policies  at  the  state  level  are  the 
ministries  for  science,  research  and  higher  education  of  the  Länder.  They  are  responsible  for 
higher  education  planning  and development,  for  the  negotiation  of  funds and  for  the  legal  and 
administrative supervision of HEIs. 

58 The four major networks are the Max Planck Society, the Helmholtz Association, the Fraunhofer Society and the 
Leibniz Association. 
59 Three Länder were surveyed by the EUA: Brandenburg (http://www.university-
autonomy.eu/countries/brandenburg/), Hesse (http://www.university-autonomy.eu/countries/hesse/) and North 
Rhine-Westphalia (http://www.university-autonomy.eu/countries/north-rhine-westphalia/) (last viewed 13.10.2013). 

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The heads of the ministries for education assemble regularly in the Standing Conference of the 
Ministers  of  Education  (Kultusministerkonferenz,  KMK)  for  coordinating  purposes.  The 
Conference aims to create and preserve comparative standards and practices across all  Länder, 
and  it  represents  the  interests  of  the  Länder  vis-à-vis  other  stakeholders  such  as  the  central 
government. 

Another key actor in higher education policies is the Federal Ministry of Education and Research 
(Bundesministerium  für  Bildung  und  Forschung,  BMBF).  The  ministry  offers  a  host  of 
programmes  in  support  of  research activities involving  HEIs  and  other  institutions. Recently  it 
has  also  supported  the  provision  of  higher  education  directly,  for  instance  by  providing  co-
funding for additional study places in a multi-year programme called the Higher Education Pact 
2020 (Hochschulpakt 2020) running from 2007 until 2015. 

The  Joint  Scientific  Conference  (Gemeinsame  Wissenschaftskonferenz,  GWK,  formerly  Bund-
Länder-Konferenz, BLK) is an assembly in which both the ministries of finance and science of 
the  Federal  state  and  the  Länder  gather  to  coordinate  nationally  significant  political  matters 
regarding  research  and  education.  The  Conference’s  work  focuses  on  strategic  aspects  of  the 
higher  education and  research  system.  Its  authority  is  derived  from  §91b  of  the  Basic  Law,  in 
which  the  possibility  of  agreements  between  the  federal  state  and  the  Länder  concerning  the 
promotion of science is stated. 

The  heads  of  German  universities  are  organized  in  the  German  Rectors’  Conference 
(Hochschulrektorenkonferenz,  HRK).  It  represents  268  universities  (2013).  The  Conference 
publishes policy papers on various matters of the HEI system, in which it tries to define common 
positions  represented  by  the  diverse  set  of  member  HEIs.  The  Conference  also  runs  a  set  of 
projects pertaining to the reform of German higher education. 

The  state-funded  Science  Council  (Wissenschaftsrat)  is  the  key  advisory  body  to  both  Länder 
and federal actors in matters of higher education. It is composed of members from the scientific 
community  as  well  as  political  representatives.  The  Council  makes  recommendations  on  the 
development of the German science and higher education system, and it conducts accreditations 
of scientific institutions. 

The German Research Foundation (Deutsche Forschungsgemeinschaft, DFG) is the single most 
important  provider  of  third-party  funds  for  university  research.60  The  DFG  is  organised  as  a 
registered  society  and  almost  entirely  publicly  funded.  In  2010,  it  had  a  total  budget  of  2.31 
billion euros (Deutsche Forschungsgesellschaft, 2010) and provided 34.1% of HEI’s total third-
party  funds  for  research.61  The  DFG  offers  funding  for  individuals,  groups  and  networks  on  a 
competitive basis. 

60 The term ‘third-party’ is used in this report to refer to all kinds of funds which are provided for specific purposes 
(usually research projects), and which are not part of the recurrent funding routines between the governments and 
the HEIs. This definition is based on the use of the term ‘third-party funds’ in Germany, and is more comprehensive 
than what one finds in other jurisdictions, where ‘third-party funding’ would exclude funds from organisations such 
as the DFG. 
61 Source: Destatis. 

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The  German  Studentenwerk  (DSW)  is  a  network  of  local  public  institution  that  offer  local 
student  services  and  lobby  centrally  for  students’  needs  in  economic  and  social  matters.  It  is 
responsible  for  the  administration  of  the  most  important  public  study  aid  system,  BAföG,  and 
other study aid programmes. The local Studentenwerke also provide subsidised food and housing 
for students and offer various sorts of counselling. 

The  Freier  Zusammenschluss  von  StudentInnenschaften  (‘Free  Association  of  Student 
Representative Bodies’, fzs) is the German umbrella organisation of local student representative 
bodies. Student representative bodies from about 80 HEIs voluntarily delegate members to this 
organisation.  The  fzs  represents  the  collective  interests  of  German  students  in political,  social, 
economic and cultural terms. 

1.3  How Governments Fund Institutions 

Due  to  the  fact  that  HEI  funding  is  a  responsibility  of  the  Länder,  there  is  a  great  deal  of 
variation  between  funding  mechanisms  in  the  German  higher  education  sector.  This  section 
outlines commonalities and differences across the Länder in a brief description. 

The traditional form of HEI funding in Germany is line-item budgeting, a process in which the 
budgets  of  HEIs  are  calculated  annually  based  on  detailed  listings  of  expenditure  categories. 
Funds are earmarked to the types of tasks and periods of time they are appropriated for, leaving 
HEIs little independence in terms of financial management. 

During  the  1990s,  the  concept  of  New  Public  Management  began  to  take  hold  in  German 
university governance. More autonomy for HEIs and more competition between HEIs were two 
central tenets of this approach which had direct consequences for matters of financing. In order 
to  increase  financial  autonomy,  several  Länder  loosened  existing  rules  of  line-item  budgeting 
over  time.  The  complete  abolition  of  line-item  budgeting  resulted in  global  budgets, i.e.,  lump 
sums  handed  out  to  universities  with  no  or  limited  provisions  on  how  to  spend  the  money. 
According to In der Smitten and Jaeger (2012, p. 40), a majority of the Länder now use bilateral 
target  and  performance  agreements  between  the  respective  ministry  and  HEI  to  influence  the 
expenditure of recurrent core funding. Some Länder (presently Brandenburg, Hesse, Schleswig-
Holstein  and  Thuringia)  also  use  indicators  to  determine  HEIs’  recurrent  core  budgets;  the 
number of students within their standard period of study62 is the most common indicator used. 

In  addition,  a  performance-based  component  has  been  introduced  into  the  HEI  core  funding, 
typically accounting for between 5% and 15% of the total state grant. Rhineland-Palatinate and 
North Rhine-Westphalia were the first Länder to introduce a performance-based component into 
their  HEI  funding  schemes  in  1991  and  1993,  respectively.  Since  then,  most  Länder  have 

62 The standard period of study is a certain number of semesters which is defined in each programme’s official 
description, e.g. six semesters for a typical Bachelor programme. 

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adopted  performance-based  funding  schemes.63  Each  scheme  is  composed  of  a  set  of  different 
indicators for past performance in research, teaching and sometimes gender mainstreaming and 
internationalisation. With the exception of Schleswig-Holstein, teaching and learning is the most 
important area of performance, accounting for 50% or more of the allocated funds in all models 
(status as  of  2010).  The  two  most  common  indicators  for  teaching performance  are  number  of 
students  within  their  standard  period  of  study,  and  number  of  graduates.  With  very  few 
exceptions, these schemes provide the basis for the funding of HEIs depending on their relative 
performance  compared  with  other  public  HEIs  of  the  same  Land.  Performance  is  measured 
annually, sometimes using averages spanning several past years. Universities and faculties have 
partially adopted similar schemes for their internal budgeting. 

Over  the  period  observed,  third-party  funding  for  HEIs  from  public  sources  has  also  increased 
and led to a higher level of financial differentiation between HEIs.  

1.4  History of Cost-Sharing 

Tuition fee policy 

of 

of  Education 

the  Ministers 

Tuition  fees  (known  at  the  time  as  Hörgeld,  literally  ‘money  for  lecture  attendance’)  were 
common in the Federal Republic of Germany up until 1970, when, following a resolution of the 
Standing  Conference 
and  Cultural  Affairs 
(Kultusministerkonferenz), public HEIs in Germany were not allowed to collect tuition fees any 
more. This situation remained stable for 35 years. In 2005, six Länder led by Christian-Democrat 
governments successfully filed a lawsuit against the general prohibition of tuition fees with the 
Federal  Constitutional  Court  (Bundesverfassungsgericht).  The  Court  ruled  that  a  general 
prohibition on tuition fees was illegitimate and that it was up to the Länder to decide whether or 
not  tuition  fees  should  be  charged  or  not.  Following  this  decision,  the  governments  of  North 
Rhine-Westphalia,  Lower  Saxony  (both  in  the  winter  semester  2006/07),  Bavaria,  Baden-
Württemberg,  Hamburg  (all  summer  semester  2007),  the  Saarland,  and  Hesse  (both  winter 
semester 2007/08) resolved to introduce tuition fees for all students. The nine remaining Länder 
did not introduce general fees.64 An upper limit of 500 euros per student per semester for first-
time students within their standard period of study is/was in place in all jurisdictions. In most, the 
exact  amount to  be  charged  was  determined  by  the  government  of  the  corresponding  Land.  In 
Bavaria  and  North  Rhine-Westphalia,  universities  were  free  to  set  the  fee  level  with  an  upper 
limit of 500 euros. These fees come/came on top of obligatory administrational fees, which vary 
between Länder and even HEIs, but which are/were never as high as the regular tuition fees (the 
range  of  administrative  fees  is  between  around  40  and  280  euros).65  In  all  Länder  tuition  fees 
are/were required to be used for the improvement of studying conditions; universities are/were 

63 As of 2013, only Bremen and the Saarland have no such schemes. The scheme is on hiatus in Bremen, and the 
government of the Saarland includes performance-related elements in its periodical target agreements with HEIs. 
9 Note on terminology: The term ‘general (tuition) fees’ will be used here to refer to fees that are regularly charged 
from most students, i.e. not only certain groups such as non-domestic students or students in certain programmes. 
65 The latter is the approximate amount students pay at Berlin HEIs, public transport included. 

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given  certain  liberties  as  to  how  they  implement  this  requirement.  According  to  the  19th 
HIS/DSW  Social  Survey  (p.  274),  in  the  summer  semester  of  2009  59%  of  students  were 
enrolled  in  a  fee-charging  HEI.  International  students  both  from  EU/EEA  and  non-EU/EEA 
countries are not treated differently to domestic students in existing fee schemes.66 

A capacity regulation has been in place since the early 1970s, which seeks to assure a balance of 
staffing  and  student  numbers  in  individual  HEIs  (see  Section  1.6  below).  One  consequence  of 
this regulation is that increasing HEIs’ central revenue may lead to the requirement of the HEIs 
to  enrol  more  students.  Importantly,  revenues  from  tuition  fees  are/were  excluded  from  this 
regulation in all Länder and as such do not require HEIs to enrol additional students. This was 
done to enable HEIs to realise quality improvements through this new revenue source. 

As  far  as  the  exact  procedures  through  which  tuition  fees  are/were  set  are  concerned,  there  is 
variation across Länder: 

In  Baden-Württemberg,  there  was  a  general  tuition  fee  of  500  euros.  In  2009, the  law  was 
changed so that students with two or more siblings paying fees were exempt from fees. 
This led to a considerable reduction in income through fees at HEIs. 

for  universities,  and  between  100  and  500  euros 

In  Bavaria,  the  ministry  set  lower  and  upper  limits  for  tuition  fees  (between  300  and  500 
euros  per  semester 
for 
Fachhochschulen).  In  fact,  most  universities  charge  500  euros  or  close  to  this,  whereas 
the  sum  varies  between  300  and  500  euros  in  Fachhochschulen.  Some  students  are 
exempt from fees, such as students with children under the age of 18 or certain groups of 
foreign  students.  No predefined upper  limits  exist  for  fees  charged  in  further  education 
degree programmes. 

In Hamburg, general fees of 500 euros per semester were charged for three semesters; after 
that time (starting in the winter semester 2008/09), the fee was lowered to 375 euros per 
semester, and a new financing model was adopted: Students did not need to pay the fees 
directly,  but  could  delay  payment  until  their  annual  income  exceeds  30,000  euros  per 
year. Hamburg was the only German Land in which this model was implemented. 

In  Lower  Saxony,  tuition  fees  of  600  to  800  euros  per  semester  for  students  beyond  their 
standard period of study existed before the introduction of general tuition fees in 2007. 
General tuition fees were fixed at 500 euros per semester for all HEIs. Students of minor 
age (under 18) and students with children below the age of 14 are exempt from fees. 
In  North  Rhine-Westphalia,  tuition  fees  for  long-term  students  were  introduced in 2004.  A 
law passed in 2006 allowed public HEIs to charge general tuition fees of up to 500 euros 
per semester. Most HEIs chose to charge the maximum or nearly maximum fee; only few 
institutions set their fees at a level below 400 euros, and fewer still charged no fees at all. 

There is no consensus on the utility or even lawfulness of tuition fees across political camps in 
Germany.  Tuition  fees  in  the  2000s  were  all  introduced  by  Länder  led  by  the  Christian 
Democratic Union (mostly in a coalition with the Free Democratic Party). The Social Democrats, 
the Greens as well as the Left Party all tend to oppose general tuition fees. Consequently, tuition 

66 A minor exception is Saxonia, where the law now allows HEIs to charge fees from non-EU/EEA students, see 
Section 3.3 for more information. 

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fees were abolished in several Länder after coalitions of Social-Democrats and the Greens came 
to  power  in  the  last  few  years:  North  Rhine-Westphalia  abolished  general  fees  in  the  winter 
semester  2011/12;  Hamburg  in  the  winter  semester  2012/13;  and  Baden-Württemberg  in  the 
summer  semester  2012.  The  new  government  of  Lower  Saxony,  which  has  come  to  power  in 
2013, has confirmed plans to scrap general tuition fees in the winter semester 2014/2015. Hesse 
abolished general fees in the winter semester 2008/09, after only one year of fees, based on an 
initiative of the political parties opposing fees. The Saarland scrapped general fees in the summer 
semester  2010  after  the  Greens  joined  the  government.  In  Bavaria,  the  governing  Christian-
Democrat-liberal  coalition  has  recently  resolved  to  abolish  tuition  fees  in  the  winter  semester 
2013/14. In the fall of 2014 there will be no Land charging general tuition fees in Germany. The 
most  common  argument  employed  by  governments  abolishing  fees  is  that  they  may  cause  a 
decline in the propensity to study and disadvantage socially vulnerable groups. 

In summary, by 2014 general tuition fees will have been a relatively short-lived phenomenon in 
recent  German  higher  education  policies.  The  maximum  period  of  time  in  which  tuition  fees 
were  charged  will  have  been  Lower  Saxony  and  Bavaria,  each  charging  fees  for  about  seven 
consecutive years. Most governments under which fees were abolished have guaranteed to HEIs 
to pay compensations for the loss of tuition fee-based revenue. These compensations are based 
on  number  of  enrolled  students,  and  like  the  fees  they  replace,  their  use  is  earmarked  for  the 
improvement of studying conditions. This will mean a net growth in state budget appropriations 
to HEIs, provided that no budget cuts are realised elsewhere. 

The  situation  with  respect  to  the  introduction  and  abolition  of  general  tuition  fees  and  the 
amounts charged in the German Länder is summarised in Table 1.1 below: 

Table 1.1: Tuition fees in German Länder 

Land 

introduction of fees 

abolition of fees 

amount per semester 

Baden-
Württemberg 
Bavaria 

summer semester 
2007 
summer semester 
2007 

summer semester 
2012 
winter semester 
2013/2014 

Hamburg 

summer semester 
2007 

winter semester 
2012/2013 

Hesse 

Lower Saxony 

winter semester 
2007/2008 
winter semester 
2006/2007 (for new 
entrants); summer 
semester 2007 (all 
students) 

winter semester 
2008/2009 
planned 2014 

500 euros 

100-300 euros in Fachhochschulen; 
300-500 euros in universities 
(institutions set the exact fee) 
500 euros until summer semester 
2008, 375 euros from winter 
semester 2008/2009 
500 euros per semester 

500 euros 

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Land 

introduction of fees 

abolition of fees 

amount per semester 

North Rhine-
Westphalia 

Saarland 

Source: Authors. 

winter semester 
2006/2007 (for new 
entrants); summer 
semester 2007 (all 
students) 
winter semester 
2007/2008 

Study aid policy 

winter semester 
2011/2012 

up to 500 euros 

summer semester 
2010 

500 euros 

The  situation  with  respect  to public aid  to  students  in  Germany  is  marked by  a  “tremendously 
large  spectrum”  (Schwarzenberger  &  Gwosc,  2008,  p.  67).  Schwarzenberger  and  Gwosć 
distinguish  between  direct  and  indirect  sources  of  student  support.  Figures  show  that  the  two 
most  important  direct  support  systems  are  the  Federal  Training  and  Education  Assistance  Act 
(Bundesausbildungsförderungsgesetz,  BAföG)  and  benefits  from  non-contributory  statutory 
health  insurance;  by  far  the  most  important  category  of  indirect  support  are  child  benefits  for 
parents of students. These three components will be explained in more detail below: 

  BAföG  support:  The  principal  aim  of  BAföG  support  is  to  guarantee  equality  of 
opportunities  by  assuring  equal  living  conditions  for  all  students.  BAföG  is  a  mixed 
grant/loan  system:  In  the  standard  case,  half  of  the  sum  a  student  receives  is  a  non-
repayable grant, whereas the other half must be repaid starting five years after the end of 
the  support.  The  loan  is  interest-free,  and  in  2001  a  rule  was  introduced  cutting  the 
accumulated loan debt at 10,000 euros. The BAföG system  was established in 1971 with 
the aim of promoting equal opportunities for potential students, in particular by supporting 
students  from  low-income  families.  BAföG  provides  means-tested  benefits,  where  the 
exact  amount  is  related  to  family  income.  As  a  result,  how  much  money  a  student  is 
entitled to receive through BAföG is based not only on his/her personal financial situation, 
but also on that of his/her parents. This is because parents are legally required to provide 
for  their  studying  children  within  the  standard  period  of  study.  The  maximum  monthly 
amount  a  student  may  receive  via  BAföG  was  originally  supposed  to  cover  the  average 
cost  of  living  of  a  student;  the  actual  amounts  have  varied  over  time.  About  29%  of  all 
regular students received BAföG support in 2009; the average support per month was 376 
euros (19th HIS/DSW Social Survey, p.194). As of 2013, the maximum BAföG support is 
670  euros  per  month.  Not  considering  numerous  special  regulations,  eligible  BAföG 
recipients must not be older than 30 (35 for master students). In the period of investigation, 
BAföG  support  covered  between  11%  and  15%  of  a  regular  student’s  income  (19th 
HIS/DSW  Social  Survey,  p.201)  on  average.  The  most  important  reforms  in  the  period 
under  investigation  took  place  in  2001,  when  access  to  BAföG  support  was  facilitated 
(mostly  by  changing  the  calculation  of  parental  income  thresholds)  and  the  maximum 

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amount  of  repayable  loans  was  reduced,  resulting  in  a  sharp  increase  in  the  number  of 
BAföG-supported students. The support is financed 65% by the federal state and 35% by 
the  Länder.  Students  at  both  public  and  private  HEIs  are  eligible  for  BAföG  support. 
BAföG is non-taxable income. 

  Benefits  from  non-contributory  statutory  health  insurance:  Children  of  parents  in  the 
statutory  health  insurance  system  are  insured  on  a  non-contributory  basis  under  certain 
conditions.  For  persons  in  education,  including  students,  the  non-contributory  status  is 
prolonged  until  the  age  of  25.  Students  older  than  25  may  still  benefit  from  a  special, 
relatively inexpensive statutory insurance up until the age of 30 (or up to their fourteenth 
semester). 

  Child benefits for parents of students: This is characterised as an ‘indirect’ type of support 
by Schwarzenberger  &  Gwosc (2008) because the money goes not to the students but to 
the  parents,  who  are  obligated  to  assure  the  livelihood  of  their  studying  children.  Child 
benefits for the first child were introduced in 1975. In that year, the amount varied between 
the equivalent of 25.56 euros per month for the first child, 35.79 euros for the second child 
and  61.36  euros  for  third  and  every  further  child  (in  non-adjusted  prices).  Parents  could 
claim child benefit until the age of 18 but were obligated to credit it against their taxable 
income. For children above the age of 18, child benefits can be  extended up to the age of 
27  if  the  child  is  in  a  secondary,  tertiary  or  professional  education  phase.  Previously 
applicable  income thresholds  limiting  eligibility  were  rescinded in 2012. Over  time  child 
benefit  rates  have  been  raised  several  times.  In  2010,  parents  received  184  euros  for  the 
first and second child, 190 euros for the third child and 215 euros for every further child.  

Schwarzenberger  &  Gwosc  (2008)  present  calculations  for  2004  according  to  which  roughly 
4.5% of total public expenditure on higher education in Germany is distributed through BAföG 
support,  roughly  9.5%  through  benefits  from  non-contributory  or  reduced  statutory  health 
insurance, and 11.4% through child benefits. (The largest part of the expenditure  – 58.5% – is 
teaching allocations to HEIs, which is not part of the study aid system considered in this section). 
The authors list more than twenty other, smaller direct and indirect categories of student support 
which together add up to over 16% of the total expenditure. 

Considering  a  typical  student’s  overall  cost  of  living,  income  from  private  sources  is  more 
important  than  income  from  public  sources.  As  shown  in  the  19th  HIS/DSW  Social  Survey, 
money received from parents is by far the most important source of student income, amounting 
to  about  50%  of  the  total  income.67  Second  most  important  is  income  through  work  (between 
24%  and  31%  in  the  investigation  period),  followed  by  BAföG  (see  above)  and  then  various 
other sources (between 9% and 11%). Consequently, with regard to the wider definition of cost-
sharing applied in this study, private sources compensate for the larger part of the student side of 
higher education cost. 

67 Part of this income is ‘indirectly public’, because it includes child benefits. The average parental support to 
students is however more than twice as much as the standard child benefit rate. 

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Policies designed to increase private investment in higher education 

Given  the  dominance  of  public  universities  in  the  German  HEI  sector,  governmental  budget 
allocations are  the  most  important  financing  source  for  higher  education.  Nevertheless,  private 
revenues play a role in the financing of HEIs, in particular with respect to research activities. An 
important  general  trend  visible  in  the  period  of  investigation  concerns  an  increased  support  of 
large,  longer-term  clusters  between  academic  and  industrial  partners  as  opposed  to  individual 
projects. This development is supported by the Federal Ministry of Education and Research as 
well as the incumbent ministries of the Länder (Wissenschaftsrat, 2007, p. 62/64), but, as noted 
in  (Knie  &  Simon,  2010,  p.  32),  the  business  sector  itself  has  assumed  an  important  role  in 
creating sustainable and more direct forms of collaboration between academia and industry since 
the  end  of  the  1990s.  A  large  programme  launched  by  the  Federal  Ministry  of  Education  and 
Research  in  2007  is  the  ‘Leading-Edge  Cluster’  competition  (Spitzencluster-Wettbewerb),  in 
which  innovative  forms  of  regional  academic-industrial  partnerships  are  stimulated  through 
public  co-funding  of  up  to  40  million  euros  for  a  period  of  five  years.  As  of  2013,  there  are 
fifteen such clusters. 

Another federal initiative that has turned out important for academic-industrial cooperation is the 
Programme  by  the  German  Federal  and  State  Governments  to  Promote  Top-level  Research  at 
Universities, better known as the ‘Excellence  Initiative’ (2006-2017). The initiative funds five-
year  projects  in  top-level  research,  where  cooperation  and  clustering  are  important  selection 
criteria. Although co-funding through private project partners is not obligatory, it is argued that 
the initiative has helped catalyse cross-sectoral collaboration (see  T.  Knie & Braun-Thürmann, 
2008) 

One  more  instrument  designed  to  reduce  barriers  to  working  with  industry  is  the  ‘Research 
Premium’ (Forschungsprämie). Introduced by the Federal Ministry of Education and Research in 
2007,  it  grants  25%  of  total  project  costs  to  HEIs  collaborating  with  small  and  medium-size 
enterprises. The Länder have also placed a strategic emphasis on supporting innovation clusters 
since the beginning of the 2000s, and have given special support to technological focus areas in 
which public research institutions are frequently involved. 

Two  recent  amendments to  federal  law  reveal  the  heightened political  expectations concerning 
the interaction between HEIs and the private sector: 

  Firstly,  earnings  from  licensing  or  selling  patents  were  made  a  possible  source  of 
revenue for HEIs in 2002, when a law was passed which obliges professors to report 
technological inventions to the HEI  management. The management can then decide 
whether  to  patent  and  commercialise  the  invention  or  not.  Before  that  time, 
professors were allowed to patent their inventions without involving their employer. 
Schmoch (2007) shows that the new law has led to a visible increase in patents filed 
by HEIs in the years after 2002. 

  Secondly, the 2007 amendment of the federal Framework Act for Higher Education 
(Hochschulrahmengesetz)  introduced  knowledge  and  technology  transfer  as  a  basic 
mission of German HEIs besides research, teaching and training of young researchers 

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–  a  principle  which  most  Länder  adopted  in  their  higher  education  laws.  Although 
one  may  not  expect direct quantifiable  effects  from  this  legal  amendment,  it  shows 
that  political  stakeholders  have  recognised  the  creation  of  links  with  the  private 
sector as an elementary task of HEIs. 

A recently introduced instrument with a potential to intensify the relationship between HEIs and 
the  private  sector  is  the  Germany  Scholarship  (Deutschlandstipendium)  established  in  2010.  It 
awards  grants  of  300  euros  per  month  to  gifted  students;  half  of  the  money  is  covered  by  the 
federal state, the other half by private sponsors, which must be sought by the HEI. The Germany 
Scholarship  represents  a  new  mode  of  cost-sharing  in  which  the  state,  HEIs,  students  and 
business are all involved in different roles. 

1.5  History of Enrolment 

Regulation of enrolment 

Paragraph 12 of the German Basic Law states that “[a]ll Germans shall have the right freely to 
choose their occupation or profession, their place of work and their place of training.” The latter 
point has direct implications for the admittance to public universities: It means that in principle 
public  HEIs  must  admit  all  German  holders  of  a  suitable  university  entrance  qualification 
wishing  to  take  up  studies  at  that  university.  From  a  student’s  perspective  this  means  that  any 
holder of a suitable entrance qualification has complete freedom to choose his/her place of study. 
This restricts HEIs’ ability to choose students autonomously. 

HEIs do have certain competencies in choosing their students in cases when demand for study 
places  exceeds  an  institution’s  teaching  capacity.  In  order  to  be  able  to  determine  an  HEI’s 
capacity,  the  ‘Capacity  Regulation’  (Kapazitätsverordnung)  was  adopted  by  all  Länder  of  the 
Federal Republic in 1977. This regulation stipulates a general method of calculating how many 
students  a  faculty  can  assume  based  on  the  number  of  its  teaching  personnel  and  the  support 
required for each student in a particular programme up to his/her degree, based on a pre-defined 
standard period of study. The Capacity Regulation was inspired by a desire to keep conditions 
for studying comparable across all Länder in the face of the rapid educational expansion of the 
time. Universities were obligated to  enrol the maximum of students they  were able to serve in 
admission-limited  programmes,  leaving  them  little  room  to  control  their  own  supply  of  study 
places. 

The  Capacity  Regulation  has  been  criticised  on  the  grounds  that  it  is  at  odds  both  with  the 
deregulation approach  practised in  many  other  areas  of university  governance  in  Germany  and 
with the present structure of study programmes. In 2006, the Standing Conference of Education 
Ministers decided that each Land should have a choice between three options: 

  The incumbent ministry can choose to adhere to the calculation of study places based 

on the Capacity Regulation in its original version. 

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  The  ministry  can  adhere  to  the  principles  of  the  Capacity  Regulation,  but  define 
upper and lower margins of teaching load, so that variation in the student-professor 
ratios become possible. 

  The ministry can negotiate the number of study places directly with the HEI. 

In  order  to  coordinate  admission  to  degree  programmes  in  which  the  demand  for  places  is 
notoriously higher than the national supply, the Central Office for the Allocation of Study Places 
(Zentralstelle  für  die  Vergabe  von  Studienplätzen,  ZVS)  was  founded  in  1972.  The  most 
important  criterion  for  determining  admittance  to  programmes  in  great  demand  was  the  high 
school  graduation  (Abitur)  grade.  Particular  grade  limits  were  set  for  each  study  programme 
under the responsibility of the ZVS. Applicants could specify several preferred places of study 
ranked  by  priority  and  depending  on  their  relative  position  in  the  pool  of  co-applicants,  were 
admitted  to  one  of  their  preferred  HEIs,  or  to  another  HEI,  or  else  put  on  a  waiting  list.  The 
procedure  was  later  amended  so  as  to  provide  for  different  entrance  grade  limits  to  different 
HEIs,  and  since  2005,  HEIs  have  even  been  able  to  specify  individual  criteria  for  admitting 
students to programmes handled by the ZVS, thus giving them a certain degree of autonomy in 
terms of admittance. The range of programmes dealt with by the ZVS has been varied over time 
as  a  function  of  changing  demand-supply-ratios.  As  of  2014,  admission  to  four  degree 
programmes  is  regulated  on  a  national  level:  Medicine,  veterinary  sciences,  dentistry  and 
pharmacy. In 2010, the ZVS was turned from an institution under public law into a foundation of 
public law and named Foundation for University Admissions (Stiftung für Hochschulzulassung). 

For degree programmes in which the demand does not regularly exceed the supply on a national 
level,  universities  can  either  keep  their  programmes  completely  free,  or  install  local  admission 
procedures  not  overseen  by  the  ZVS.  In  the  latter  case, the  responsible  university  departments 
establish charters specifying criteria of admission. The contents of these charters must obey the 
university laws or regulations of the respective Land, which must in turn respect regulations of 
the  more  general  federal  Framework  Act  for  Higher  Education  (Hochschulrahmengesetz).  Not 
only the average  Abitur grade may be applicable here, but also more specific factors, like high 
school  performance  in  certain  subject  areas  relevant  to  the  study  programme  in  question,  or 
particular  abilities.  For  the  admission  to  Master  programmes,  the  previous  completion  of  a 
suitable Bachelor degree is most relevant, but other criteria, such as an account of the applicant’s 
personal  motivation  or  the  provision  of  certain  performance  records,  are  also  used.  Bogumil, 
Heinze, & Gerber (2011) report national survey data according to which 88.3% of the surveyed 
universities  have  degree  programmes  in  which  students  are  picked  in  an  institutional-level 
selection procedure. Survey data from Willich, Buck, Heine, & Sommer (2011, p. 126) show that 
between  2000/01  and  2009/10,  the  share  of  first-time  first-year  students  applying  through  the 
ZVS  has  decreased  (32%  in  2000/01  as  compared  to  20%  in  2009/10),  whereas  the  share  of 
students applying directly at universities (48% in 2000/01 as compared to 70% in 2009/10) has 
increased.  Nevertheless,  as  per  2009/10,  only  14%  of  all  respondents  reported  that  their 
application procedure involved aspects other than the general university entrance qualification or 
the high school graduation grade (Willich et al., 2011, p. 131). Although the figure is still small, 
it doubled in ten years (2000/01: 7%). 

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As  of 2013, about 50% of all Bachelor programmes and about 37% of all Master programmes 
have  restricted  admission.68  Although  the  Bachelor  degree  was  initially  supposed  to  be  the 
regular  degree  with  which  graduates  enter  the  job  market,  most  Bachelor  degree  holders  have 
chosen to take up Master studies after obtaining their Bachelor degree.  Heine (2012) reports that 
nearly 75% of all Bachelor graduates take up consecutive Master studies. It is yet uncertain how 
this development will affect the regulation of admission to Master study  places in the medium 
and long term. 

The  situation  of  student  admission  in  Germany  can  be  summarised  as  follows:  Historically, 
public  HEIs  have  had  relatively  little  freedom  to  choose  which  and  how  many  students  they 
admit.  Admission  to  HEIs  is  to  a  large  degree  regulated  by  federal  and  provincial  laws  and 
institutions. However, since the mid-2000s, a tendency to give HEIs more influence in deciding 
which and, to a lesser degree, how many students to admit has become visible. This also means 
that  students  may  need  to  pass  through  interviews  or  present  performance  records  in  order  to 
obtain their preferred study place, and, as may be the case, make compromises concerning the 
HEI at which they enrol. 

Figure  1.1  shows  enrolment  in  HEIs  from  1995  to 2010.  The  expansion of  the  German  higher 
education  sector  is  clearly  documented  by  the  growth  in  new  entrants  from  about  260,000  in 
1995 to over 440,000 in 2010, an increase of over 69%. A decrease in new entrants is observable 
between 2003 and 2006, followed by a steep increase in the years thereafter. Both universities 
and  Fachhochschulen  expanded  capacities 
the 
Fachhochschulen  accommodating  a  slightly  higher  share  of  the  additional  demand  despite  the 
sector being smaller in absolute terms.  

increasing  demand,  with 

to  meet 

68 Calculations based on information from the on-line database Hochschulkompass (www.hochschulkompass.de). 

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Figure 1.1: New entrants in universities and Fachhochschulen (1995-2010) 

Source: Federal Statistical Office of Germany (Destatis). 

The number of students enrolling at private and religious HEIs has also increased markedly, but 
still remains at a relatively low level when compared to the public sector, as Figure 1.2 shows: 

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050,000100,000150,000200,000250,000300,000350,000400,000450,000500,0001995199619971998199920002001200220032004200520062007200820092010new entrantsall HEIsUniversitiesFachhochschulentrendline (all HEIs) 
National Report for Germany 

Figure 1.2: New entrants in public and private (including Church-maintained) 
HEIs (1995-2010) 

Source: Destatis. 

This shows that in absolute terms, the largest part of the enrolment increases is accommodated 
by public HEIs. 

Figure  1.3  represents  transition  rates  of  secondary  school  graduates  with  an  HEI  entrance 
qualification (Abitur). The lower line shows the percentage share of pupils obtaining the  Abitur 
among the entire cohort of 18-20 year-old school leavers. It highlights the fact that the share of 
HEI  entrance  qualification  holders  is  lower  in  Germany  than  in  most  European  countries.69 
Paralleling the data from Figure 1.1, the graph shows a decrease in participation between 2003 
and 2006, with a recovery in the years after. The data for the years 2008 and 2010 are taken from 
a  HIS-HF  panel  study  which  surveys  secondary  school  graduates  with  university  entrance 
qualifications. The figures (72% transition in 2008 and 2010) are the sum of those respondents 
who  specified  that  they  have  already  enrolled  at  an  HEI  or  have  definite  plans  to  enrol.  To 
provide  some  context,  the  lower  line  specifies  the  share  of  HEI  entrance  qualification  holders 
among  each  cohort  of  school-leavers.  It  has  been  growing  but  is  still  clearly  below  European 
average. 

69 According to the OECD’s ‘Education at a Glance’ ( 2011 issue, Table A2.1), the percentage of pupils graduating 
from secondary school with a university entrance qualification (ISCED type 5A) was 62% in the EU21-area in 2009. 

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050,000100,000150,000200,000250,000300,000350,000400,000450,0001995199619971998199920002001200220032004200520062007200820092010enrolmentsPrivate HEIsPublic HEIs                                                 
 
National Report for Germany 

Figure 1.3: Transition rates among secondary-school graduates with HEI 
entrance qualifications (1995 to 2009) 

Source:  Autorengruppe  Bildungsberichterstattung  (2012)  /  HIS-Survey  of  secondary  school  graduates  with  HEI 
entrance  qualifications  six  months  after  their  secondary  school  graduation  (2008,  2010)  /  Destatis  (share  of 
university entrance qualification holders). 

Figure 1.4 focusses on higher education participation by students in the four age-years with the 
highest participation rates in higher education (‘best four years’). The overall population in the 
best four years grew by 13% within ten years, while the student population grew by 49% in the 
same period. As a result, participation rates rose by 7% (21% to 28%) over time, with only one 
small drop in 2007. Consequently, the increase in enrolments we see in Figures 1.1/1.2 is for the 
most part due to increased participation, and to a lesser extent to demographic developments. 

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77%77%74%74%76%79%77%78%77%74%73%70%72%72%36%37%37%37%37%37%36%38%39%42%43%43%44%45%46%49%0%10%20%30%40%50%60%70%80%90%1995199619971998199920002001200220032004200520062007200820092010transition from secondaryuniversity entrance qualification holders 
National Report for Germany 

Figure 1.4: Higher education participation in age group of best four years (2000-
2011) 

Note: Best four years are 21-24. Domestic students only. The group covers between 37% and 43% of all students.  
Source: BMBF data portal / own calculations. 

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21%22%22%24%24%25%25%24%25%26%27%28%0%5%10%15%20%25%30%0500,0001,000,0001,500,0002,000,0002,500,0003,000,0003,500,000200020012002200320042005200620072008200920102011studentstotal populationparticipation (right axis) 
 
National Report for Germany 

2.  HYPOTHESIS  A:  AS  PRIVATE  FUNDING  INCREASES, 

INSTITUTIONAL REVENUE INCREASES 

This  chapter  looks  at  data  relevant  to  Hypothesis  A,  which  states  that  as  private  funding 
increases,  institutional  revenue  increases,  but  only  if  public  funding  remains  constant.  That 
means that it will examine whether: 

 
 
 

there has been an increase in private funding 
there has been a concurrent change to public funding 
there has been a total increase in funding and how this is related to changes in private and 
public revenues. 

Changes  in institutional  funding  will  be  considered  both  in  terms  of  total  institutional  revenue 
and relative to the number of students. 

2.1  Changes in Institutional Revenues over Time 

In  order  to  test  Hypothesis  A,  it  is necessary  to  make  a distinction between  public and  private 
revenues of HEIs. This is a difficult task in the German case, because the data reporting systems 
are  not  geared  toward  this  distinction.  As  will  be  explained  in  more  detail  below,  the  official 
statistics focus on what HEIs receive funds for rather than where they come from. Accordingly, 
they  distinguish  between  recurrent  core  funding  (provided  for  the  operation  of  core  tasks  in 
teaching  and  research,  the  amount  of  which  is  specified  as  described  in  Section  1.4), 
administrative revenues of HEIs (revenues of assets and revenues of services delivered by HEIs, 
excluding research) and third-party funding provided on top of institutional funding, usually for 
research projects. A figure which can be derived from official statistics is total income of HEIs, 
specified here as the sum of recurrent core funding, income from assets and economic activities, 
third-party funding and tuition fees.70 This can be used to obtain an approximation of the general 
financial situation of the German HEI sector over time.71 

The data, presented in Figure 2.1, show an overall increase of 47% in 15 years, from 14.1 billion 
euros in 1995 to 20.7 billion euros in 2010. This means that the consequent of Hypothesis A is 
fulfilled: Institutional revenues have increased, even markedly. The question is now whether and 
to what degree this increase is attributable to the private sector. 

70 Funds provided for capital expenditure are excluded from calculations regarding income because they are only 
specified as a category of expenditure, not income, in the official statistics. 
71 In this and all ensuing figures and data on HEI financing, university hospitals and clinics are excluded as these 
costs are not directly related to research and teaching expenditure and are unevenly spread between the Länder and 
individual HEIs. 

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Figure 2.1: Income of HEIs (1995–2010)72 

Note: Income rendered as the sum of recurrent core funding and income from fees, third-party funds, assets and 
economic  activities.  Private  HEIs  include  Church-maintained  institutions.  University  hospitals  and  clinics  are 
excluded. Constant prices (2011). 
Source: Destatis / own calculations. 

As noted before, the answer to this is complicated by the structure of the available administrative 
data. An additional difficulty is that while on the side of the recipients, the data do distinguish 
between  the  public  and  private  HEI  sector,  it  is  impossible  to  specify  the  cost-sharing  ratio  in 
private  HEIs.  Although private  HEIs  are  for  the  most  part  financed  through  tuition  fees,  some 
Länder contribute to the institutional funding of private HEIs, and private HEIs may moreover 
receive  public 
third-party  funds  and  benefit  from  federal  funding  programmes  (see 
Wissenschaftsrat, 2012). According to a study published by the  Stifterverband für die deutsche 
Wissenschaft (Frank, Hieronimus, Killius, & Meyer-Guckel, 2010), the average income structure 
of  a  private  German  HEI  includes  4%  third-party  funds  from  public  sources  and  12% 
institutional  core  funding,  which  may  include  public  contributions.  The  exact  share  of  public 
funds to private HEIs cannot be determined using available data. 

Figure 2.2 represents percentage shares of total HEI income as defined in Figure 2.1 above for 
the private and public sector separately. 

72 Germany introduced the euro as a currency in 2002. Before that time, the national currency was the Deutsche 
Mark. Its currency rate was fixed as follows: 1 euro equals 1.95583 Deutsche Mark. All calculations in this report 
are based on this equivalence for the years up to and including 2001. 

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05,00010,00015,00020,00025,0001995199619971998199920002001200220032004200520062007200820092010million euros                                                 
 
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Figure 2.2: Shares of total HEI income by sector (1995-2010) 

Note: Income rendered as the sum of recurrent core funding and income from fees, third-party funds, assets and 
economic  activities.  Private  HEIs  include  Church-maintained  institutions.  University  hospitals  and  clinics  are 
excluded. 
Source: Destatis / own calculations.  

These data support the observations from Chapter 1 that quantitatively speaking, the private HEI 
sector  still  plays  a  marginal  role  in  the  German  HEI  landscape  despite  a  significant  growth 
through the years. In view of the fact that Germany was chosen for this project as an instance of 
a country in which higher education is predominantly provided by public institutions (i.e., private 
funding  of  private  institutions  is  not  substantial),  the  following  analysis  of  financial  data  will 
only consider the public sector. This avoids the problem of assigning income of private HEIs to 
public  or  private  sources,  although  it  should  be  borne  in  mind  that  the  actual  share  of  private 
higher  education  funding  in  Germany  will  remain  underestimated  through  the  exclusion  of 
private HEIs. 

What the available data on the funding of public HEIs can provide is an approximate distinction 
between private and public third-party funds, and the income through tuition fees (since 2006), 
which will also be counted as private contributions. This will be done next. Before looking at the 
data, the following comments are in order: 

  The problem of assigning administrative revenues remains unsolved. An example of 
this  source  of  funding  would  be  if  an  HEI  lets  rooms  to  an  external  organisation. 
Depending on whether that organisation is public or private, the income would have 

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0%10%20%30%40%50%60%70%80%90%100%1995199619971998199920002001200220032004200520062007200820092010public HEIsprivate HEIs 
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to be counted as coming from public or private sources. Since this information is not 
available, administrative revenues will be treated as a distinct element that cannot be 
assigned to public or private. 

  Tuition  fees  are  only  recorded  as  a  separate  source  of  income  from  2006  onwards. 
The category is officially called ‘student contributions’ and it includes administrative 
fees.  Before  2006,  fees  (for  special  programmes  or  for  students  beyond  their 
stipulated  period  of  study)  were  included  in  the  category  of  ‘administrative 
revenues’. Since no Land had general tuition fees before 2006, this change does not 
distort the data too much. From 2006 onwards, student contributions are factored out 
of administrative revenues in the presentation below. 

foundation, 

important  German  science 

  The  official  statistics  include  ‘revenues  from  foundations’  as  a  separate  category. 
However,  it  cannot  be  determined  whether  these  funds  are  public  or  private.  The 
most 
the  Volkswagen  Foundation 
(Volkswagenstiftung),  received  its  funding  capital  from  revenues  of  selling  a  state-
owned automobile firm. The stock company providing the foundation capital is partly 
owned  by  the  public  and  partly  by  private  investors.  The  Volkswagenstiftung  is 
legally  speaking  a  charitable  foundation  established  under  private  law.  A  clear 
classification of the funds it provides as either public or private is not obvious. It is 
conceivable  that  similar  problems  would  arise  for  the  assignment  of  other 
foundations, too. Therefore, funds from foundations will be represented as a separate 
category, too. 

  The statistics, moreover, include a category for third-party funds from ‘international 
organisations’. Since it cannot be determined whether these organisations are public 
or private, this category is excluded from the figures below. 

Applying  these  restrictions,  Figure  2.3  results.  We  see  that  regardless  of  the  assignment  of 
administrative revenues, the public HEI system in Germany is to a large degree publicly funded. 
Nonetheless,  a  trend  towards  more  private  funding  is  visible:  If  private  third-party  funds  and 
tuition  fees  are  grouped  together  as  private  contributions,  their  share  of  public  HEIs’  income 
increased from 2.8% in 1995 to 8.3% in 2010 (maximum of private: 9.4% in 2008). From 2005 
onwards,  the  share  of  income  from  public  sources decreased  as the  share  of  income  from  fees 
increased. 

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Figure 2.3: Relative amounts of income of public HEIs from different sources 
(1995-2010) 

Note:  Total  public  funding  rendered  as  the  sum  of  recurrent  core  funding  and  third-party  funding  from  public 
sources. Income from student contributions includes tuition fees, administrative fees and examination fees. Other 
income includes revenue from economic activities and assets. University hospitals and clinics are excluded. 
Source: Destatis / own calculations.  

Looking  at  the  absolute  amounts  of  funding,  one  sees  that  all  sources  discussed  above 
contributed  to  the  growth  of  the  system.  In  particular,  with  regard  to  Hypothesis  A  it  can  be 
stated that the growth of public funding to HEIs is not negatively correlated with private funding 
to HEIs: 

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0%10%20%30%40%50%60%70%80%90%100%1995199619971998199920002001200220032004200520062007200820092010income from public sourcesincome from private third-party fundsincome from student contributionsother incomeincome from foundations 
National Report for Germany 

Figure 2.4: Absolute amounts of income of public HEIs from different sources 
(1995-2010) 

Note: Income from public sources given as the sum of recurrent core funding and third-party funding from public 
sources. University hospitals and clinics are excluded. Constant prices (2011). 
Source: Destatis / own calculations. 

Third-party funds 

Official  statistics do  not distinguish between  third-party  funds  for  research and  for teaching.  It 
can be assumed that the largest part of third-party funds is provided for research purposes.73 The 
term  ‘third-party  funds’  is  sometimes  also  applied  to  tuition  fees  (‘third-party  funds  for 
teaching’), but this usage will not be adopted here, i.e., tuition fees will be regarded as a separate 
source  of  income  of  HEIs.  The  increase  in  the  amount  of  private  third-party  funds  is  a  salient 
feature  of  Figure  2.4.  Concerning  public  third-party  funds,  an  even  stronger  increase  can  be 
determined:  The  importance  of  this  income  source  trebled  in  the  period  of  investigation.  The 
figures  show  that  the  absolute  amount  and  the  share  of  both  public  and  private  third-party 
funding increased sharply. 

73 But cf. Konegen-Grenier & Winde, 2011 for an investigation into the business sector’s financial contributions to 
HEI teaching and learning. 

269 | P a g e  

05101520251995199619971998199920002001200220032004200520062007200820092010billion eurosincome from privatethird-party fundsincome fromstudent contributionsother incomeincome from foundationsincome frompublic sources                                                 
 
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Third-party  funding  and  tuition  fees  are  the  two  major  elements  through which changes  in  the 
cost-sharing balance can result, given that institutional core funding is by definition provided by 
public  sources  for  public  HEIs.  What  is important  in  the  German  case  is that increasing  third-
party funds from the business sector have not caused a significant shift in the overall cost-sharing 
balance, because third-party funds from public sources have increased as well, even more so than 
private  funds.  This  becomes  visible  when  looking  at  the  shares  of  third-party  funders.  The 
category  ‘public  funds’  in  Figure  2.5  below  includes  that  part  of  funding  from  public  sources 
which is not allocated in the way of institutional core funding.  

Figure 2.5: Percentage of third-party revenue of public HEIs from public and 
private sources and foundations (1995-2010) 

Note: Public third-party funds are the sum of contributions from the following funders of the official statistics: the 
federal state, the Federal Employment Agency, the Länder (excluding institutional core funding), the communities, 
‘other  public  sources’,  the  German  Research  Foundation  (DFG),  and  the  European  Union.  Funds  from  private 
sources include societies for the promotion of higher education institutions and funds from the business economy. 
Funds  from  ‘international  organisations’  were  excluded  because  they  could  not  be  assigned  to  either  public  or 
private. University hospitals and clinics are excluded. 
Source: Destatis / own calculations. 

The  three  most  important third-party  contributors  are  the  German  Research  foundation  (DFG), 
the  federal  state,  and  private  business.  In  2009,  34.1%  of  all  third-party  funds  to  HEIs  were 

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0%10%20%30%40%50%60%70%80%90%100%1995199619971998199920002001200220032004200520062007200820092010public sourcesprivat sourcesfoundations 
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provided by the DFG, 22.1% by the federal state and 21.1% by business. Both the DFG and the 
federal  state  have  increased  their  share  of  the  overall  third-party  funds to  HEIs,  while  no  such 
tendency  is  observable  for  the  business  sector.  In  absolute  terms  however,  all  third-party 
contributors  greatly  increased  their  funding  levels  in  the  period  of  investigation:  In  constant 
prices  (2011),  the  public  sector  increased  its  third-party  funds  from  1.05  billion  euros  to  3.3 
billion euros (equalling an increase by a factor of 3.1), and business increased its funds from 0.35 
billion to 0.95 billion (a factor of 2.7). 

There  is  variation  concerning  the  role  of  private  contributors  to  HEI  funding:  Bavaria  has  the 
highest share of private third-party funding, with an average of 32% of all third-party funds. In 
the city states, the share is clearly smaller (about 15%). 

Tuition fees 

In  Germany,  private  income  through  student  contributions  increased  in  significance  in 
2006/2007, when general tuition fees were introduced to the public HEIs of some Länder. Since 
this  type  of  revenue  was  relevant  for  only  some  Länder,  it  makes  sense  to  consider  them 
separately. 

Figure 2.6 shows the tuition fees in euros per student for five  Länder which charged fees from 
2007 until 2010. The figures are an approximation because the student numbers are specified for 
each winter semester,  whereas the income figures are per calendar year.  The figure shows that 
the average amount of income per student was between 600 and 700 euros a year. The income 
per student was highest in  Lower Saxony in 2009 and 2011. The  Land had the lowest ratio of 
exemptions (see Section 4.1). The decrease in Baden-Württemberg after 2007 is partly due to a 
new regulation which exempted students with two or more fee-paying sibling from paying fees.  

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Figure 2.6: Euros per student from tuition fees in public HEIs of five Länder 
(2007-2011) 

Note: Bavarian data 2007 underestimated. Constant prices (2011). 
Source: Destatis / own calculations. 

Figure  2.7  displays  the  share  of  tuition  fees  as  a  percentage  of  total  income  for  those  seven 
Länder  which  had  or  still  have  general  tuition  fees.  The  graph  shows  that  in  most  Länder, 
income  through  fees  amounted to  between  6%  and  8%  of  the  income  of  HEIs  for  most  of  the 
time. Hesse (2008) and the Saarland (2010) abolished fees in the period of investigation, which 
is  why  their  curves  drop  to  near  zero  in  the  graph  (administrative  fees  and  fees  from  special 
study  programmes  remained).  In  the  other  Länder  with  the  exception  of  Bavaria  and  Lower 
Saxony, the percentage of income obtained through fees diminishes after 2007, an effect which is 
mostly due to a stronger increase in other sources of income. 

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010020030040050060070080090020072008200920102011eurosBaden-WürttembergBavariaHamburgLower SaxonyNorth Rhine-Westphalia 
 
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Figure 2.7: Tuition fees as a percentage of total income of public HEIs in seven 
Länder (2007-2011) 

Note: Income specified as the sum of recurrent core funding and other income excluding funds for investment. 
Source: Destatis / own calculations 

Also worth mentioning is the fact that for Fachhochschulen, fees had a stronger financial impact 
than  for  universities.  This  is  mainly  because  Fachhochschulen  have  smaller  research  budgets 
than  universities.  As  a  consequence,  income  through  tuition  fees  accounted  for  a  greater 
percentage  of  the  total  income  of  Fachhochschulen  than  of  universities.  In  Hamburg  for 
example, Fachhochschulen received 19% of their total income through fees in 2007, whereas it 
was  only  6%  for  the  universities  in  the  same  year.  The  following  graph  shows  the  differences 
between universities and Fachhochschulen: 

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0%1%2%3%4%5%6%7%8%9%20072008200920102011Baden-WürttembergBavariaHamburgHesseLower SaxonyNorth Rhine-WestphaliaSaarland 
National Report for Germany 

Figure 2.8: Tuition fees as a percentage of total income of public universities 
(left) and Fachhochschulen (right) in seven Länder (2007-2011) 

Note:  Income  specified  as  the sum of recurrent core  funding  and  other income  excluding  funds  for investment. 
University hospitals and clinics are excluded. 
Source: Destatis / own calculations. 

Looking at the country as a whole, public Fachhochschulen received 6.9% of their total income 
through fees on average between 2007 and 2010, whereas the figure for universities is 3.9%.74 

In all Länder, tuition fees are/were earmarked for the improvement of studying conditions (see 
Section 1.5), and all governments affirmed that tuition fees were going to be additional funds for 
HEIs. This has two important implications: 

Income through tuition fees is not used to finance the quantitative expansion of the system. 
Income through tuition fees is not accompanied by cuts in other budgetary components. 

74 These figures include fees for long-term students and for special fee-based programmes (e.g. in further education). 

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20072008200920102011Lower SaxonyNorth Rhine-WestphaliaSaarland0%2%4%6%8%10%12%14%16%18%20%20072008200920102011Baden-WürttembergBavariaHamburgHesse                                                 
 
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Different  experts  interviewed  for  this  report  verified  these  propositions.  Therefore,  the 
assumption can be made that tuition fees in Germany shifted the cost-sharing balance towards a 
greater  contribution  from  private  stakeholders,  but  under  a  special  condition:  The  additional 
private funds were used for qualitative improvements in a specific area of HEI performance. The 
principal rationale behind this was to create a direct link between what students contribute and 
what HEIs offer them in return for that contribution.75 

As was noted earlier, fees have been or will be abolished in all seven Länder pointed out above, 
and all of them have established or are going to establish compensational funds which are/will be 
provided  by  the  government.  This  implies  that  the  cost-sharing  balance  will  shift  towards  the 
opposite direction for this type of expenditure, i.e. the public shares will increase. 

To  see  how  spending  on  the  HEI  sector  has  changed  compared  to  the  country’s  economic 
development, Figure 2.8 displays the contribution of the three most important sources of funding 
represented in Figure 2.4 as a percentage of the country’s (deflated) GDP. 

Figure 2.9: Contributions to funding of public HEIs from different sources as a 
percentage of GDP (1995-2010) 

Note: Income from public sources given as the sum of recurrent core funding and third-party funding from public 
sources. University hospitals and clinics are excluded. Constant prices (2011). 
Source: Destatis / own calculations. 

75 The comparative report of this research shows that this is use of tuition fees is common but not universal, as some 
jurisdictions chose to invest tuition fees in e.g. creating additional study places or raising salaries. 

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0.0%0.1%0.2%0.3%0.4%0.5%0.6%0.7%0.8%1995199619971998199920002001200220032004200520062007200820092010public fundingprivate third-party fundingstudent contributions                                                 
 
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The  graph  shows  a  total  increase  in  spending  on  public  HEIs  from  both  public  and  private 
sources in relation to GDP. However, the financial growth of the higher education sector shown 
in  Figure  2.1  diminishes  considerably  when  relativised  to  GDP.  Moreover,  Germany’s  total 
spending on the tertiary education sector has been below OECD average according to ‘Education 
at  a  Glance’  throughout  the  period  of  investigation:  The  OECD  average  spending  on  tertiary 
education institutions is between 1.3% and 1.5% of GDP according to ‘Education at a Glance’, 
whereas  the  German  spending  was  at  1.1%  between  1998  and  2007  (2001:  1.0%),  and  only 
started  to  rise  to  1.2%  and  1.3%  in  2008  and  2009,  respectively.76  From  this  perspective,  the 
recent growth in income of HEIs can presumably be interpreted as a narrowing of the gap with 
respect to the OECD average. 

2.2  Institutional Expenditures 

This section focusses on how changes in overall income of HEIs affect the student experience. In 
order  to  do  this, a decision  must be  made  about how  to  deal  with the  main  funding categories 
discussed in Section 2.1: Institutional core funding, third-party funding, and tuition fees. 

Recurrent  institutional  core  funding  comprises  funds  for  the  core  tasks  of  HEIs:  teaching  and 
research,  including  funds  for  administration,  equipment  etc.  The  providers  of  the  funds  do  not 
distinguish between funds for research and funds for teaching. Professors at universities have an 
average teaching load of about 8-9 hours of courses per week during the semester (for professors 
at  Fachhochschulen,  it  is  about  twice  that  amount).  At  the  universities,  professors  are  also 
required to  do  research,  but  this is not  quantified directly  by  law,  as  it  is  the  case  in  teaching. 
Therefore, in the following calculations recurrent core funding will be included as a whole in the 
calculation  of  funds  per  student.77  Tuition  fees  will  be  included  as  well,  because  they  are 
exclusively spent on teaching due to legal regulations. Third-party funds as defined earlier will 
be excluded, because they are primarily provided for research purposes. The graph in Figure 2.10 
is the result of these calculations: It shows a slightly increasing curve for income per student/year 
through  the  period  of  investigation.  For  both  universities  and  Fachhochschulen,  income  per 
student increased by about 500 euros between 1995 and 2011, but not in a linear fashion. 

76 Source: Federal Ministry of Education and Research (http://www.datenportal.bmbf.de/portal/de/Tabelle-
2.1.5.html, 24.07.2013). 
77 Some data sets differentiate between expenses on teaching and on research by stipulating a normative factor 
which specifies the amount of teaching and the amount of research a professor usually does. This method will not be 
applied here. 

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Figure 2.10: Income per student per year from recurrent core funding and 
tuition fees in public HEIs (1995-2011) 

Note: University hospitals and clinics are excluded. Constant prices (2011). 
Source: Destatis / own calculations. 

It  should  be  added  that  these  figures  do  not  take  into  account  the  influence  of  any  extra 
programmes connected to the financing of study places, such as the Higher Education Pact.  In 
the  first phase  of  the  pact  (2007-2010),  additional  funds  from  the  federal  state  and  the  Länder 
were provided to finance 91,000 additional study places. The programme was later extended for 
a  second  phase  (2011-2015).  The  federal  government  will  have  spent  7  billion  euros  on  this 
programme  by  2015  (Bundesministerium  für  Bildung  und  Forschung  (BMBF),  n.d.-b).  The 
agreement between the federal state and the Länder specified that for each additional student, the 
programme was going to provide 22,000 euros in the first phase and 26,000 euros in the second 
phase  (Gemeinsame  Wissenschaftskonferenz,  n.d.).  The  impact  of  this  programme  cannot  be 
factored in to the above chart because the relevant statistics do not specify it separately. 

The relative stability of the income per student is interesting when considering the steep increase 
of  total  student  numbers  (see  Figure  1.1):  It  entails  that  total  expenditure  on  higher  education 
must have increased. 

To  examine  whether  fee-charging  Länder  differ  from  non-fee-charging  Länder  in  terms  of 
spending per student, the following graph differentiates Figure 2.10: 

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Figure 2.11: Income per student per year from recurrent core funding and 
tuition fees in fee-charging and non-fee-charging Länder (2005-2011; 2005 = 1) 

Note: Hessen and Saarland are excluded. University hospitals and clinics are excluded. Spending per student not 
weighted by student numbers in Länder. Constant prices (2011). 
Source: Destatis / own calculations.  

The figure shows that with the exception of  Fachhochschulen in fee-charging  Länder in 2008, 
spending per student increased by a similar amount in fee-charging and non-fee-charging Länder 
throughout the period in which fees were charged (from 2007 onwards). This means that Länder 
without  fees  apparently  managed  to  increase  spending  per  student  out  of  public  funds.  A 
the  growing  difference  between 
noteworthy  pattern  highlighted  by  Figure  2.11 
Fachhochschulen  in  fee-charging  and  non-fee-charging  Länder  between  2008  and  2011. 
However,  this  pattern  is  only  partially  linked  to  increasing  private  income  through  fees:  The 
greater  part  of  the  gap  between  the  two  groups  of  Fachhochschulen  was  caused  by  a  stronger 
increase in recurrent core funding in fee-charging Länder than in non-fee charging Länder. An 
exception  is  Hamburg  (not  shown  separately  in  Figure  2.11),  where  institutional  funding  was 
reduced  between  2005  and  2010  but  Fachhochschulen  realised  an  overall  increase  in  funding 
through fees. 

is 

Total  spending  by  other  private  contributors  per  student  cannot  be  specified  using  available 
statistics.  A  study  that  investigates  spending  on  students  from  the  perspective  of  business  and 
industry  (but  not  HEIs)  is  Konegen-Grenier  &  Winde  (2011).  For  the  year  2009,  the  authors 
calculate  that  business  invested  1.539  billion  euros  in  the  academic  education  of  individuals 
(Konegen-Grenier & Winde, 2011, p.7). Out of that, 675 million euros were spent on financing 

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0.900.951.001.051.101.151.201.252005200620072008200920102011Universities with feesFachhochschulen with feesUniversities without feesFachhochschulen without fees 
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students in dual study programmes, 535 on internships, 286 on financing higher education, 41 on 
grants, and 2 on other activities.  

Another, more indirect way of assessing how changes in institutional revenue affect teaching is 
to look at the student/teacher ratio. The assumption is that higher spending per student will lead 
to  a  lower  students-to-teacher  ratio.  For  Germany,  official  statistics  do  not  clearly  distinguish 
teaching  personnel  inside  the  group  of  academic  staff;  this  is  because  the  standard  case  for 
academic staff is to  be active in both research and teaching.  Figure 2.12 results from dividing 
the number of students at all HEIs by the number of academic staff. The graph shows a relatively 
stable progression with a slight decrease after 2006 for HEIs as a whole. Most noticeable is the 
increase in students per staff in the Fachhochschulen in the 2000s. This mirrors the decrease in 
funding per student at Fachhochschulen taking place in the same period (see Figure 2.10). 

Figure 2.12: Students per academic staff (1995-2011) 

Note: Staff listed as ‘part-time’ multiplied by factor 0.5, staff listed as ‘full-time’ by factor 1. 
Source: Destatis / own calculations. 

Also  of  interest  in  this  context  is a  look  at how  fee-charging  Länder invested  additional  funds 
from  fees.  In  Lower  Saxony,  the  percentage  of  income  through  fees  spent  on  additional 
personnel increased steadily, from 20.9% in 2006 to 55.6 % in 2009 (NMWK, 2010).This means 
that  roughly  53  million  euros  were  spent  on  employing  additional  personnel  in  2009  in  Lower 
Saxony.  In Baden-Württemberg, 46.5% (64 million euros) of the fees  were spent on additional 
teaching  staff  in  2009/2010  (Monitoringbeirat,  2011,  p.  27).  In  the  same  year,  Bavarian 
universities spent 47.2% of their income through tuition fees (28.8 million euros) on additional 
academic staff with teaching obligations (Fachhochschulen: 6.9 million euros, equalling 38.9%; 

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see  Gensch  &  Raßer,  2011,  p.  86).  The  sources  do  not  state  how  many  staff  members  were 
employed through these funds, making it impossible to analyse this change directly in terms of 
student/teacher  ratios.  However,  the  federal  statistical  office  publishes  student/staff  ratios 
differentiated by Länder. Figure 2.13 illustrates changes in this ratio in five Länder charging fees 
from 2007 until 2011.  The graph shows that the student/staff ratio decreased in all five  Länder 
between 2007 and 2011. However, with the exception of Hamburg, this appears to be a tendency 
that started before the introduction of fees. Moreover, the data show the same pattern for the non-
fee-charging  Länder,  so  that  it  can  be  assumed  that  tuition  fees  were  not  the  (sole)  driver  of 
lower student/staff ratios. 

Figure 2.13: Students per academic staff in five fee-charging Länder (all HEIs, 
2005-2011) 

Note: Staff listed as ‘part-time’ multiplied by factor 0.5, staff listed as ‘full-time’ by factor 1. 
Source: Destatis / own calculations.  

2.3  Evaluation 

The  evidence  amassed  in  this  chapter  suggests  that  the  German  case  supports  Hypothesis  A 
insofar as public revenues of HEIs in fee-charging Länder did not decrease as private revenues 

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increased.  However,  some  qualifications  concerning  the  role  of  private  and  public  funding 
streams for the HEI system are in order. 

Across all Länder, recurrent core funding for public HEIs rose by 19% in real terms in the period 
of investigation, whereas third-party funding for public HEIs rose by 139%. This means that the 
absolute  financial  growth  was  mainly  caused  by  an  increase  in  third-party  funds  from  both 
private  and public  sources.  This  observation  is  in  line  with  that  of  several  interviewed  experts 
who stressed that the most important change in the income structure of  HEIs  was the  growing 
importance of third-party funds.  

Although  third-party  contributions  from  the  private  sector  steadily  increased  in  the  period  of 
investigation, their share of overall third-party contributions did not, because public third-party 
funds increased even more. This growth is mainly due to an expansion of the funding activities 
of the public German Research Foundation (DFG) as well as the federal state. In recent years, the 
country’s  ‘Research  Excellence  Initiative’,  launched  in  2006 cooperatively  by  the  federal  state 
and the Länder, provided HEIs with several billion euros of additional funds, mainly for research 
projects (see DFG, n.d.). 

While  third-party  funding  is  spent  for  the  most  part  on  research,  tuition  fees  have  been  spent 
exclusively  on  teaching  and  teaching-related  activities,  due  to  political  regulations.  As  the 
analysis showed, in Länder charging fees after 2006, the share of fees to HEIs’ total income was 
mostly  in  the  range  between  6%  and  8%.  Importantly,  fees  were  used  to  improve  study 
conditions, not to create new study places or finance non-teaching-related measures in all Länder 
concerned.  The  experts’  view  and  the  literature  both  suggest  that  these  measures  were  indeed 
effective. One expert reported his observation that fee-charging Länder were under pressure not 
to  cut  government  funds  to  HEIs  because  stakeholders  had  become  alert  to  the  importance  of 
adequate HEI funding after the introduction of fees. 

In Germany, tuition fees were not used to finance the quantitative expansion of the system, and, 
according  to  one  expert,  this  has  never  even  been  up  for  discussion  in  Germany.  The  recent 
increase  in  student  numbers  was  instead  financed  by  a  growth  in  institutional  funding  and 
additionally by a programme launched cooperatively by the federal state and the Länder in 2007: 
the Higher Education Pact 2020.  In  other  words, the expansion of the system  was financed by 
public  funds  except  for  the  small  but  growing  contribution  of  the  private  sector.  Besides 
increasing institutional core funding for HEIs, in recent years (2007 onwards) additional public 
funds  have  also  been  invested  in  improving  the  quality  of  teaching:  The  Quality  Pact  for 
Teaching (Qualitätspakt Lehre) makes available 2 billion euros between 2011-2020 for measures 
to  improve  the  quality  of  HEI  teaching,  for  instance  by  employing  additional  personnel 
(Bundesministerium für Bildung und Forschung (BMBF), n.d.-a). The extra funds are provided 
by the federal state; the Länder agreed to provide adequate institutional core funding in return. 

The  precise  amount  of  contributions  of  the  business  sector  to  the  HEI  system  could  not  be 
quantified. This is partly a consequence of the official statistical data grids, which do not always 
distinguish between private and public sources; and partly due to the way in which HEIs benefit 
financially  from  contributions  of  the  business  sector.  Contributions  in  terms  of  equipment, 

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lectureships  or  sponsorships,  to  name  a  few  activities,  have  a  tangible  financial  value,  but  are 
insufficiently captured by the statistics.  

After the demise of general tuition fees in Germany, the current debate about higher education 
funding has been less focussed on how costs should be shared between public and private parties, 
but  rather  between  the  Länder  on  the  one  hand  and  the  central  state  on  the  other  hand.  An 
emerging majority of stakeholders advocates a stronger engagement of the federal state in higher 
education  funding  to  relieve  the  Länder  from  their  increasing  financial  constraints.  Ways  to 
make this scheme compatible with existing legal restrictions have yet to be found.  

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3.  HYPOTHESIS  B:  AS  THE  INCENTIVES  TO  EARN 
PRIVATE FUNDING INCREASE, INSTITUTIONS BECOME 
MORE RESPONSIVE TO USER DEMAND 

This  chapter  looks  at  data  relevant  to  Hypothesis  B,  which  states  that  as  incentives  to  earn 
private  funding  increase,  institutions  become  more  responsive  to  user  demand.  However,  this 
expected  effect  is  conditional  on  the  attractiveness  of  these  private  revenues  and  whether 
increasing these revenues has trade-off effects for the overall behaviour or prestige of HEIs.  

Various aspects of responsiveness will be examined, including changes to provision, enrolment 
and the connection between HEIS and users. If no changes to responsiveness are visible, this is 
likely  related  to  the  incentive  structure  present  in  the  higher  education  system,  which  might 
favour other behaviours such as the maximisation of public over private funding. As will become 
clear in the course of this chapter, Germany is an example of a country in which incentives to 
increase responsiveness remained limited in the period of investigation, making it a difficult case 
with which to test Hypothesis B. 

3.1  Enrolment by Discipline 

The aim of this section is to examine whether HEIs change their provision of study programmes 
as a result of changes in cost-sharing. 

According  to  expert  opinion,  the  introduction  of  fees  in  Germany  was  not  linked  to  plans  to 
change  the  range  of  existing  programmes.  Such  changes  could  rather  be  expected  from  the 
Higher  Education  Pact  2020,  because  the  Pact  explicitly  aims  to  enable  the  Länder  to  “set 
priorities”, which might involve priorities in terms of fields of study. 

Nevertheless,  depending  on  the  degree  of  freedom  an  HEI  has  to  close  and  establish  study 
programmes it is conceivable that HEIs in fee-charging Länder attempt to attract more students 
for low-cost programmes (within the limits set by their governments) in order to obtain the best 
possible ‘profit’ from the unitary tuition fee.78 

To  see  whether  such  an  effect  is  visible,  enrolment  patterns  were  investigated  as  a  proxy  for 
changes  in  the  supply  of  programmes.  Figure  3.1  represents  the  changes  in  enrolment  for  the 

78 In the period of investigation, the situation in Germany was marked by a growing autonomy of HEIs’ ability to 
decide on the establishment of study programmes. Most ministries merely confirm the establishment of study 
programmes, and accreditation is carried out by independent agencies. In some Länder (e.g. Bavaria and Lower 
Saxony), the establishment of study programmes is dealt with in target agreements between the HEIs and the 
ministry, which is in charge of higher education planning for the Land; see Winter (2011, pp. 246-248). 

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country as a whole. The graph shows relatively stable enrolment patterns, with a slight increase 
in  the  subjects  of  science,  mathematics  and  computing  during  the  2000s  (+2.7%  percentage 
points  between  1999  and  2007).  Enrolments  in  Engineering,  Manufacturing  and  Construction 
decreased by roughly the same amount in the late 1990s but recovered in the 2000s. 

Figure 3.1: Enrolment in HEIs by field of study (1995-2010) 

Source: Destatis / own calculations. 

To see whether the introduction of tuition fees had effects on enrolment behaviour, Figures 3.2-
3.4 display the situation in three fee-charging Länder from 2004 onwards. 

The decisive stretch of time for all of these three  Länder would be the years 2007-2010, since 
2007 was the time when all three of these Länder introduced tuition fees. Changes in enrolment 
patterns  as  a  consequence  of  the  introduction  of  fees  might  concern  increases  in  study 
programmes that allow more flexibility than others (giving students the opportunity to work in 
part-time  employment  parallel  to  their  studies),  or  programmes  associated  with  better  rates  of 
return; or decreases in programmes for which it is more difficult to enter the job market directly 
after graduation (in Germany, this is mainly the case for humanities - see Briedis, Fabian, Kerst, 
& Schaeper, 2008). Overall, the enrolment patterns in fee-charging Länder do not show a clear 
sensitivity to tuition fees. The changes observable after 2006/07 appear to be within the natural 
range of fluctuation taking place throughout the period of investigation in fee-charging and non-
fee-charging  Länder.  Changes  such  as  the  relative  increase  of  entrants  in  engineering, 
manufacturing  and  construction  in  Bavaria  (+3  percentage  points)  appear  to  continue 

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developments that had already begun earlier. The other fee-charging Länder not represented in 
the charts below do not show significant changes in enrolment patterns after the introduction of 
tuition fees, either. 

Figure 3.2: Enrolment in Bavarian HEIs by field of study (new entrants 2004/5-
2010/11) 

Source: Destatis / own calculations. 

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34%32%32%33%35%35%33%23%23%23%22%20%20%20%17%18%18%17%17%17%18%18.7%20.0%19.8%20.6%20.7%21.4%22.6%3%3%4%4%4%4%3%2%2%2%2%2%2%2%1.3%1.3%1.2%1.3%1.0%1.0%1.1%0%10%20%30%40%50%60%70%80%90%100%Social Sciences, Business and LawArts and HumanitiesScience, Physical Science, Math, ComputingEngineering, Manufacturing and ConstructionHealth and WelfareAgriculture 
 
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Figure 3.3: Enrolment in Hamburg HEIs by field of study (new entrants 2004/5-
2010/11) 

Source: Destatis / own calculations. 

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Figure 3.4: Enrolment in Lower Saxony HEIs by field of study (new entrants 
2004/5-2010/11) 

Source: Destatis / own calculations. 

3.2  Enrolment Patterns by Mode 

Part-time study programmes 

This section is about the provision of part-time study programmes, i.e., programmes specifically 
designed to be executed in part-time by way of an extended standard period of study. Changes in 
actual time budgets spent on studying will be discussed in Chapter 4.  

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The official statistics do not take into account part-time study programmes; they only distinguish 
between  basic  study  programmes  and  further  education.  The  HIS/DSW  Social  Survey  does 
however  include  data  on  the  number  of  part-time  study  programmes,  which  are  derived  from 
statistics administered by the German Rectors’ Conference. Based on this source, the number of 
basic part-time study programmes (excluding part-time further education programmes) between 
2004 and 2014 is shown in Table 3.1: 

Table 3.1: Part-time basic study programmes (2004-2014) 

Number of part-time programmes 

Percentage of all study programmes 

2004 
2007 
2009 
2012 
2014 
Source: 16th to 19th HIS/DSW Social Survey / German Rectors’ Conference via Hochschulkompass (2014). 

119 
217 
224 
505 
732 

 1 
2.5 
2.5 
5.4 
7.6 

The  figures  show  a  clear  overall  increase  in  basic  part-time  programmes.  In  addition  to  this, 
HEIs  can  allow  for  certain  regular  programmes  to  be  studied  part-time  by  lengthening  the 
deadlines for courses to be taken, examinations to be passed, etc.79 Such offers are not included 
in the above figures, which only count dedicated part-time programmes. 

The growth of part-time study programmes in Germany cannot be directly related to cost-sharing 
considerations: no additional fees are/were  charged for part-time student status as such.  In fee-
charging Länder, the usual procedure was/is to reduce fees for part-time students proportionally 
to their use of services. Consequently, an expansion of part-time programmes to raise additional 
private revenue could only be expected from HEIs in fee-charging Länder, where every student 
is  a  source  of  additional  revenue.  As  data  on  the  provision  of  part-time  programmes 
differentiated  by  Länder  are  not  available,  no  statements  can  be  made  to  this  effect.  In  the 
literature on the topic, the increase in part-time students and programmes is taken to be indicative 
of a more pronounced service orientation of HEIs: Institutions are trying to better accommodate 
to  a  change  in  demand,  and  in  the  case  of  part-time  study  programmes,  demand  from  persons 
with  young  children  appears  to  be  just  as  important  as  demand  from  professionally  active 
persons (see Kibler, 2011). 

Further education programmes 

What  appears  to  be  more  important  in  terms  of  modes  of  study  than  basic  part-time  study 
programmes  is  the  provision  of  further  education  programmes.  These  programmes  are 
specifically  designed  for  persons  who  have  gone  through  formal  education  and  have  gathered 
professional  experience.  The  programmes  build  upon  and  extend  professional  experiences, 

79 An example of an HEI providing this service is the University of Potsdam: 
http://www.uni-potsdam.de/studium/konkret/studienorganisation/teilzeitstudium.html (09.07.2013). 

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usually  with  a  scientific  orientation.  They  can,  but need  not  conclude  with  a  scientific degree. 
The  following  table  presents  data  on  the  number  of  further  education  programmes  at  German 
HEIs  over  time.  It  only  includes  Master  programmes,  which  are  the  standard  form  of  further 
education  programmes  in  Germany.  Table  3.2  shows  that  further  education  programmes  are  a 
rapidly  growing  segment  in  both  the  public  and  the  private  sector:  The  number  of  ‘non-
consecutive Master programmes’  (i.e., Master programmes building on learning outcomes of a 
particular professional activity) increased more than three-fold in both public and private HEIs 
within seven years. However, in the private sector further education is clearly more relevant: In 
2014,  almost  one  in  two  Master  programmes  offered  by  private  HEIs  was  non-consecutive, 
whereas  the  share  was  13%  in  the  case  of  public  HEIs.  This  demonstrates  that  private  HEIs 
specialise  in  offers  that  are  not  focussed  on  as  much  by  public  HEIs  (a  point  which  will  be 
elaborated in Section 3.4 below). 

Table 3.2: Further education study programmes by sector (only Master 
programmes, 2007-2014) 

Public HEIs 

Private HEIs 

Number of non-
consecutive Master 
programmes 

Share of all Master 
programmes 

Number of non-
consecutive Master 
programmes 

Share of all Master 
programmes 

2007 

2008 

2009 

2010 

160 

298 

395 

447 

6.3% 

8.0% 

9.0% 

8.7% 

2014 
Source: German Rectors’ Conference / own calculations. 

13.1% 

639 

39 

68 

81 

112 

128 

22.2% 

27.0% 

28.7% 

31.9% 

49.0% 

The cost-sharing regulations with respect to further education programmes vary between Länder, 
but  in  general  public  HEIs  in  Germany  are  allowed  to  charge  fees  for  further  education 
programmes so as to at least cover the cost of their provision. This means that unlike basic study 
programmes,  further  education  programmes  are  a  potential  source  of  private  income  from 
students  for  public  HEIs.  According  to  several  interviewed  experts,  public  HEIs  have  been 
reluctant  in  making  use  of  this  source  of  private  income.  Two  experts  commented  that  many 
HEIs simply do not see it as part of their core mission to provide further education. This would 
be in contrast to the position of the Standing Conference of Education Ministers, who appealed 
to  HEIs  to  acknowledge  further  education  as  one  of  their  core  tasks  (Kultusministerkonferenz, 
2001),  respecting  the  Framework  Act  for  Higher  Education.  Since  Hypothesis  B  assumes  that 
HEIs  not  only  have  the  opportunity,  but  also  the  incentive  to  earn  private  funds,  it  has  to  be 
determined first whether such incentives actually exist for (public) HEIs in the realm of further 
education programmes, and whether there are other incentives thwarting them. 

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Investigating this issue, Weiland (2006) finds that by international comparison, German HEIs are 
not  very  active  in  the  area  of  further  education,  and  suggests  that  aside  from  the  demand-side 
causes,  this  might  have  to  do  with  the  high  degree  of  competition  in  the  field  of  further 
education, with many non-HEI providers competing in the most sought-after professional fields. 
The Deutsche Gesellschaft für wissenschaftliche Weiterbildung und Fernstudium e.V. (Deutsche 
Gesellschaft  für  wissenschaftliche  Weiterbildung  und  Fernstudium,  2005)  observes  that  many 
public  HEIs  lack  the  possibility  to  determine  the  actual  cost  of  their  further  education 
programmes and are therefore not in a position to fix realistic prices  despite legal requirements 
to do so. In addition, as noted by  Witte & von Stuckrad (2007, p. 92), the provision of further 
education  programmes  does  not  affect  an  HEI’s  stipulated  capacity,  i.e.,  students  in  further 
education programmes do not ‘count’ in the ministry’s calculation of staff appropriations.80 This 
might make it disadvantageous for an HEI to engage in further education, at least as long as there 
is no unused capacity at the institution. 

Summing  up  the  evidence,  the  reluctance  of  public  HEIs  to  generate  private  income  through 
further  education  programmes  appears  to  be  caused  by  a  mixture  of  a  general  lack  of 
entrepreneurial  drive  in  such  activities  on  the  one  hand,  and  structural  conditions  that  make 
competing for students in further education unattractive on the other hand. 

3.3  Enrolment Composition 

The aim of this section is to investigate whether  enrolment composition changes as a result  of 
HEIs changing their offer to more profitable areas of study, where private revenues are high. 

The general situation with respect to tuition fees in German Länder is such that there is no single 
group  of  students  that  has  to  pay  a  higher  amount  of  fees  than  any  other.  Therefore, 
maximisation  of  private  income,  if  at  all  a  goal  of  public  HEIs,  cannot  be  reached  by  way  of 
attracting  (or  crowding  out)  certain  groups  of  students.  As  a  result,  any  changes  to  enrolment 
composition at German HEIs cannot be linked to cost-sharing considerations. A recent and novel 
development concerns Saxony: in 2013, the Saxonian Parliament passed a law allowing HEIs to 
charge  fees  from  non-EU  international  students,  if  the  HEI  establishes  a  concomitant  grant 
scheme  for  this  group  (Die  Staatsministerin  für  Wissenschaft  und  Kunst,  2013).  The  music 
college in Leipzig (HMT Leipzig) is the first Saxonian HEI to make use of this option: It charges 
non-EU  international  students  1,800  euros  per  semester  (Hochschule  für  Musik  und  Theater, 
n.d.).  It  is  too  early  to  say  whether  and  how  this  changes  enrolment  composition  at  the 
institution. 

80 An exception is Schleswig-Holstein, where HEIs can reserve up to 10% of their total teaching capacity for further 
education. 

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3.4  Diversity of Provision 

Changes in the number of HEIs 

Figure 3.5 shows the number of public and private institutions by sector. While the number of 
institutions  remained  relatively  stable  in  the  public  sector,  there  was  a  strong  increase  in  the 
number  of  institutions  in  the  private  sector,  particularly  in  the  2000s.  The  number  of  private 
Fachhochschulen increased from 69 in 2000 to 130 in 2011. 

Figure 3.5: Number of public and private HEIs by sector (1995-2011) 

Source: Destatis. 

Private HEIs are for the most part financed through tuition fees, which leads to the assumption 
that they have a high demand-orientation (see Werner & Steiner, 2010, p. 483). In 2013, more 
than half of all study programmes offered by private HEIs are in business studies, and in 2010 
60% of all students at private HEIs were enrolled in a programme with a business-related focus. 
The second largest group was health and welfare (20% of all programmes). Private HEIs are on 
average  much  smaller  than  public  HEIs:  The  average  total  student  number  in  private  HEIs  is 
roughly  1,000,  as  opposed  to  about  8,000  in  public  HEIs.  A  typology  of  private  HEIs  in 
Germany is developed in Frank et al. (2010). The most popular types of private HEIs according 
to  this  study  are,  firstly,  institutions  which  offer  academic  education  for  professions  that  were 
formerly  trained  exclusively  in  the  non-tertiary  sector  (mostly  health,  IT,  business,  media  and 
design  and  crafts);  secondly,  institutions  offering  flexible  programmes,  which  are  attractive  to 
persons  who  are  employed  parallel  to  their  studies;  and  thirdly  institutions  that  offer  tightly-
organised  basic-degree  programmes  with  a  focus  on  a  rapid  labour-market  entry.  The  authors 

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02040608010012019951996199719981999200020012002200320042005200620072008200920102011institutionsPublic universitiesPublic FachhochschulenPrivate universitiesPrivate Fachhochschulen 
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stress  that  only  a  minority  of  private  HEIs  in  Germany  seek  to  train  elites,  and  that  on  the 
contrary many private HEIs make offers to students to whom public HEIs do not appeal and who 
otherwise would not have considered higher education at all (Frank et al., 2010, p.7). From this 
perspective,  private  HEIs  certainly  contribute  to  the  diversity  of  provision  in  the  German  HEI 
landscape. However, as the authors also note, public HEIs have begun to embrace what used to 
be distinctive features of private HEIs – e.g. a focus on applicability of learning outcomes and a 
strong service orientation –, thus increasing competition for private HEIs. As Figure 3.5 shows, 
in the period of investigation the private sector apparently succeeded in bearing up against this 
competition. 

The  average  size  of  public  and  private  institutions  as  measured  by  enrolment  numbers  is 
represented  in  Figure  3.6.  The  figure  shows  great  differences  between  universities  and 
Fachhochschulen, and  between  the  public  and private  sector.  Public  universities  are  by  far  the 
largest institutions, with about 17,000 enrolled students on average. Public Fachhochschulen are 
much  smaller  with  around  4,000  students  on  average  in  the  latter  half  of  the  1990s  and  an 
increase  to  below  6,000  in  2010.  The  private  sector  has  much  smaller  institutions,  with  an 
average of about 1,000 students in both universities and Fachhochschulen. 

Figure 3.6: Average size of public and private HEIs by sector (1995-2011) 

Source: Destatis. 

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02,0004,0006,0008,00010,00012,00014,00016,00018,00020,00019951996199719981999200020012002200320042005200620072008200920102011enrolmentsPublic universitiesPublic FachhochschulenPrivate universitiesPrivate Fachhochschulen 
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3.5 

 “Outreach” Practices 

Marketing budgets 

In  the  interviews,  several  experts  were  asked  about  HEIs’  changing  outreach  practices.  They 
agreed  that  in  the  period  of  investigation,  there  has  been  a  tendency  for  HEIs  to  increase 
investments in marketing. One informant observed that some HEIs intensify marketing activities 
in order to attract more students, but that this could not be linked to cost-sharing considerations. 
Rather,  in  all  Länder  a  part  of  the  funds  received  by  HEIs  is  directly  linked  to  how  many 
students are enrolled. This in turn creates an incentive to attract more students, but not because of 
additional private revenue. 

Another  expert  commented  that  ‘his’  institution  was  trying  to  focus  its  marketing  activities  on 
special  groups  of  students,  but  again  not  because  of  cost-sharing  considerations,  but  rather  in 
order to attract those students that fit the institution’s profile particularly well. Examples of such 
target groups would be students with high academic achievement for an HEI with a high quality 
orientation, or international students for an HEI with an international profile. 

Composition of governance and advisory boards 

The most prominent advisory boards involving external stakeholders are the ‘university councils’ 
(Hochschulräte). University councils were successively introduced in the organisation of HEIs in 
all Länder beginning in 1995 (Lange, 2010, p. 349). Their function is in some ways comparable 
to that of supervisory groups of stock companies. In some Länder, university councils advise the 
HEI management; in other Länder, they have decision-making power. Their basic domain is in 
the  area  of  strategy-building.  University  councils  marked  a  turning  away  from  the  idea  of 
academic  self-administration,  because  they  are  for  the  most  part  staffed  by  representatives  of 
external  stakeholders  from  business,  politics,  religious  and  cultural  organisations  etc.  One 
interviewed expert commented that the establishment of university councils is indeed a sign of 
increased  involvement  of  external  stakeholders  in  HEI  governance,  but  is  not  related  to  cost-
sharing  in  the  sense  that  possible  or  actual  funders  are  specifically  chosen  as  members  of 
university councils. Contrary to this standpoint,  Nienhüser (2012) found that HEIs  with above-
average  third-party  funds  from  business  also  have  an  above-average  share  of  business 
representatives in their university councils. Nienhüser proposes that this is because HEIs with a 
high share of private third-party funds are more dependent on reliable relationships with business 
and industry partners. The appointment of top-level managers of private enterprises in university 
councils  signals  to  other  businesses  that  the  HEI  is  an  attractive  cooperation  partner,  which  in 
turn  helps  to  sustain  these  relationships.  Consequently,  according  to  this  research,  a  stronger 
involvement of business and industry in university governance can be both a cause and an effect 
of increased cost-sharing. 

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Relationship with employers 

Concerning  outreach  to  employers,  one  expert  commented  that  there  is  a  growing  tendency 
towards  strategic  partnerships  between  business  enterprises  and  HEIs.81  The  parties  strive  to 
establish long-lasting collaborations based on the matching profiles of both sides. According to 
the expert, such collaborations are initiated by the enterprises at least as much as by the HEIs. 
They pertain to joint projects in research, but at the same time to aspects of teaching and learning 
(provision  of  internships,  dual  study  programmes  etc.),  and  hence  also  involve  the  business 
partner in its function as an employer. 

Another  expert  commented  that  a  qualitative  change  in  relationships  with  employers  is  not 
observable  from  her  perspective,  and  that  if  relationships  with  employers  have  become  more 
important  for  HEIs  in  the  period  of  investigation,  it  is  rather  due  to  policy  goals  (cf. 
‘employability’ as a central aspect of the Bologna reforms) than to cost-sharing considerations. 

Entrance policies 

There  is  no  evidence  from  either  the  literature  or  the  interviews  that  HEIs  have  changed  their 
entrance policies out of cost-sharing considerations. In fact, such changes can hardly be expected 
given the framework conditions in Germany: The number of students a public HEI can enrol is 
state-regulated.  Regarding  private  HEIs,  one  interviewed  expert  noted  that  in  general,  private 
HEIs in Germany behave more flexibly with respect to entrance criteria than public HEIs (e.g. in 
terms of performance records required from applicants to be allowed into a given programme) 
and  linked  this  to  private  HEI’s  greater  dependency  on  income  from  tuition  fees.  Empirical 
research  on  this  issue  was  not  found  to  be  available.  A  problem  in  comparing  admission 
standards  of  public  and  private  HEI  is  that private  HEIs  regularly  apply  admission  procedures 
that are different in type from those of public HEIs (e.g. interviews and screening tests instead of 
Abitur grades). 

3.6  Quality and Relevance 

Student satisfaction with study programme and support services 

For the  years from 2007 onwards, a pertinent source of  information about quality measured in 
terms of student satisfaction is the ‘Study Quality Monitor’ (Studienqualitätsmonitor), a survey 
operated  by  DZHW.  In  Heine  and  Quast  (2011),  the  authors  discuss  whether  judgements 
regarding  student  satisfaction  differ  in  fee-charging  and  non-fee-charging  Länder.  Their 
conclusion for the period 2007-2009 is that students judge study conditions more positively over 
time, but not only in fee-charging Länder, but also in Länder without fees. They conclude that 
improvements  in  perceived  quality  cannot  be  traced  to  the  introduction  /  use  of  fees,  but  are 

81 This observation is corroborated by (Wissenschaftsrat, 2007, p. 92). 

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rather a result of general efforts of HEIs to improve their services (Heine & Quast, 2011, p. 75). 
The authors also point out that students at HEIs in Eastern German  Länder are generally more 
satisfied  with  their  study  conditions  than  those  in  Western  Germany,  although  no  Eastern 
German  Land  ever  charged  fees  in  the  period  of  investigation.  According  to  Autorengruppe 
Studienqualitätsmonitor (2012, p. 124), this effect can be explained at least partly by lower use 
of capacity and thus  better student/teacher ratios in Eastern German HEIs. Moreover, the authors 
of  this  study  conclude  that  in  fee-charging  Länder,  measures  financed  out  of  fee  income 
contribute significantly to the improvement of perceived quality in teaching. 

Using data from the same survey, Hauschildt, Jaeger, & Quast (2013) find that in Lower Saxony, 
a fee-charging Land, student satisfaction increased between 2007 and 2011 (in particular in 2010 
and 2011), and apply a multivariate regression analysis to show that this change can actually be 
linked to the improvements of study conditions financed through tuition fees (Hauschildt, Jaeger, 
& Quast, 2013, p. 29). 

Rehn,  Brandt,  Fabian,  &  Briedis  (2011) present  survey  data  on  graduates  for  the  period  1989-
2009 which includes information on graduates’ opinion on various quality related aspects of their 
degree  programme.  The  data  shows  that,  overall,  according  to  the  perception  of  graduates  the 
quality  of  higher  education  programmes  has  improved  throughout  the  period  of  investigation. 
However, the authors do not relate these findings to cost-sharing issues in any way. 

Graduate satisfaction with employment outcomes 

The  survey  data  presented  in  Rehn,  Brandt,  Fabian,  &  Briedis  (2011)  includes  information  on 
graduate  satisfaction  concerning  various  aspects  of  their  employment  outcome.  Overall, 
satisfaction  has  increased  over  the  period  of  investigation  (1989-2009);  it  is  particularly  high 
with regards to the content of tasks performed by graduates as well as their working conditions. 
Furthermore, graduates report that their degrees have become increasingly valuable in terms of 
fuelling their professional career: The share of graduates reporting that their degree was highly 
valuable in this respect increased by around 15 percentage points for university graduates (1989: 
42%, 2009: 57%-58% depending on degree type) and 22 percentage points for  Fachhochschul-
graduates  (1989:  52%,  2009:  73%-75%  depending  on  degree  type).Employer  satisfaction  with 
labour market supply 

Changes in employer satisfaction over time can be used as an indication of a change in relevance 
of  educational  services.  In  Germany,  there  is  no  national  survey  pertaining  to  employer 
satisfaction  with  HEI  graduates,  and  no  studies  are  known  in  which  employer  satisfaction  is 
correlated  with  cost-sharing  issues. A  much  stronger  focus  in  research  on  employability  in the 
last  decade  was  on  the  effects  of  the  Bologna  reforms,  particularly  of  the  new  degree  types 
(Bachelor / Master), see e.g. the survey by Konegen-Grenier, Placke, & Stangel (2011). 

With  respect  to  the  more  general  issue  of  labour-market  demand  for  graduates  of  HEI 
programmes,  one  interviewed  expert  elaborated  that  public  HEIs  wishing  to  introduce  a  new 
programme  need  to  establish  that  there  is  a  labour-market  demand  for  future  graduates  of  this 

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programme.  But,  as  the  expert  also  noted,  there  is  no  requirement  to  support  this  criterion  by 
needs  analyses  (such  as  surveys  with  potential  employers),  and  in  recent  years  accreditation 
agencies have seldom refused an accreditation based on this criterion. 

3.7  Evaluation 

Summarising  the  results  of  this  chapter,  a  tendency  towards  stronger  consideration  of  user 
demand is visible in Germany; however, the main cause of this tendency does not appear to be 
stronger incentives to increase private revenues, as Hypothesis B suggests. 

There is no clear indication that institutional behaviour has changed to maximise private revenue. 
This  result  must  be  contextualised  by  the  framework  conditions  under  which  public  HEIs  in 
Germany operate. Firstly, HEIs have limited opportunities to act in such a way as to maximise 
private revenues: Charging general tuition fees has not been an option for most of the period of 
investigation due to legal and political regulations. Even when general fees  were introduced in 
some  Länder,  they  were  tightly  regulated  in terms  of  the  amounts  and  other  settings.  The  fact 
that  there  was  no  differentiation  between  fields  of  study  and  thus,  actual  costs  of  provision, 
shows  that  fees  were  not  introduced  to  allow  HEIs  to  cover  their  actual  costs,  but  rather  to 
conduct  quite  specific  measures  aimed  at  improving  the  conditions  of  teaching  and  learning 
throughout the institution. Therefore, any strategic behaviour aimed at attracting more students 
or focussing on ‘profitable’ fields of study could not be expected from public HEIs in the first 
place.  As  was  pointed  out  earlier  in  Section  2.1,  even  the  maximum  tuition  fees  in  Germany 
covered  only  a  fraction  of  the  actual  cost  of  higher  education,  which  shows  that  the  idea  of 
incentivising HEIs to attract (more) students could not have been the decisive rationale behind 
the legalisation of fees in the first place: Each additional student increased the need for adequate 
supplementary  funding  from  public  sources.  Nevertheless,  the  earmarking  of  tuition  fees  to 
quality-related  measures  shows  that  the  German  fee  systems  do  have  a  direct  link  to  user 
responsiveness,  although  it  is  mediated  by  state  regulations.  In  this  connection,  one  of  the 
interviewed experts commented that the tight regulation of the tuition fee regime in Germany can 
be related to the deep-rooted notion of educational equity, which is hardly compatible with the 
idea of institutions charging fees in any desired amount to maximise their revenues. 

Although  a  general  statement  cannot  be  made  to  the  effect  that  cost-sharing  considerations 
caused HEIs to increase their responsiveness to student and employer demand, a trend towards 
an increased  user-orientation  is nonetheless  observable  according to  various  sources, including 
most  interviewed  experts.  As  stated  by  one  expert,  this  trend  is  primarily  rooted  in  the 
‘academisation’  of  the  labour  market:  More  and  more  employers  demand  a  highly  skilled 
workforce,  and  HEIs  play  a  key  role  in  providing  those  skills  through  a  scientifically  based 
professional  education.  According  to  the  expert,  the  increasing  demand  of  a  highly  trained 
workforce  on  the  labour  market  has  an  influence  on  how  HEIs  define  their  core  mission: 
Training an elite of future academic researchers is no longer feasible as a primary task of HEIs in 
such an environment, and has come to be replaced by a stronger responsiveness to the demands 
of the labour market. According to this line of argument, a higher degree of user responsiveness 
was not triggered by incentives to increase private revenues, but rather by the necessity to adapt 

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to a changing socio-economic environment. The same expert also pointed to the integral role of 
business enterprises in this process, namely as HEI-external cooperation partners in practically-
oriented study programmes or study phases. Focussing more on political measures undertaken to 
link HEIs and the labour market, another expert commented that political agendas, such as the 
Bologna reform, had a stronger impact on the user responsiveness of HEIs than any cost-sharing-
related concerns. This statement was supported by another informant, who commented that the 
increasing importance of employability as an educational goal of study programmes is not least 
due to the normative influence of accreditation agencies. 

Another,  more  indirect  measure  through  which  user-orientation  is  incentivised  is  state  funding 
models allocating funds based on the number of students an HEI services: The more successful 
an HEI is in attracting students, the better its financial situation. One can say that these financing 
models follow the logic of demand-orientation even in the absence of a fee system. As noted in 
Section  1.4,  most  Länder  have  a  performance-based  funding  component  which  counts  the 
number  of  enrolled  students  (among  other  things).  However,  the  question  of  whether  and  how 
the introduction of performance-based funding has changed institutional and individual scientific 
behaviour is under debate; Jaeger (2008) found that performance-based funding schemes have so 
far had limited incentivising effects (see also Orr & Jaeger, 2009). Some Länder even determine 
recurrent  core  funding  based  on  the  number  of  enrolled  students.  Nevertheless,  it  cannot  be 
assumed that institutions depend entirely on actual student demand even in this latter group of 
Länder,  since  the  calculations  are  either  based  on  target  numbers  of  students,  which  are 
negotiated  between  the  HEI  and  the  ministry  in  advance  (in  Hamburg,  Hesse  and  Schleswig-
Holstein),  or  they  are  supplemented  by  other,  input-based  parameters  (in  Brandenburg  and 
Thuringia). 

In Länder in which fees were introduced, they did lead to a stronger user-orientation according to 
the  experts  and  the  literature.  This  can  partly  be  seen  as  a  direct  consequence  of  the  legal 
regulations that were set up when fees were introduced: The laws established that fees must be 
used to improve study conditions on-site. This in itself can be regarded as an expression of user 
responsiveness.  Additionally,  one  expert  reported  that  the  requirement  to  pay  fees  caused 
students to voice their concerns with more confidence, thereby also affecting the way professors 
perceive  their  role  as  teachers.  Another  informant  noted  that  tuition  fees  sparked  constructive 
discussions about the role and quality of teaching in HEIs, involving both students and teachers. 
In a more sceptical vein, one of the interviewed experts observed that across the German higher 
education landscape, a negative correlation was discernible between charging fees and allowing 
for student participation in HEI governance, and linked this to the co-occurrence of ‘managerial’ 
(as  opposed  to  participatory)  governance  and  the  view  of  students  as  mere  ‘buyers’  of 
educational services. A piece of evidence supporting this view is that in 2005, four of the seven 
Länder that introduced tuition fees in 2006/2007 were involved in a public lawsuit against a draft 
framework  law  which  would  have  guaranteed  students a  say  in  the  university’s  self-governing 
boards (a status known as verfasste Studierendenschaft, literally ‘constituted student body’).  

The findings with respect to responsiveness to business and industry are ambiguous: On the one 
hand, novel forms of collaboration between public HEIs and private business were found to have 
evolved  in  the  period  of  investigation,  and  HEIs’  income  from  business  and  industry  almost 

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tripled in the period of investigation. On the other hand, this did not result in an increase in the 
share  of  private  third-party  funding  according  to  the  statistics.  Again  in  this  area,  it  is 
questionable whether it can be assumed on a general level, as does Hypothesis B, that HEIs have 
received incentives to maximise revenues from private third-party funds. What is quite clear is 
that  external  funding  as  such  has  become  more  and  more  important.  But,  considering  that  the 
growth of public third-party funding authorities like the German Research Foundation (DFG) has 
outshined the growth of private third-party funding, it cannot be stated that in general HEIs are 
under exceeding pressure to increase their responsiveness to the business sector.  

The  interviewed  experts  agreed  that  HEI  governance  has  given  more  attention  to  outreach 
activities like fund-raising, sponsoring and alumni-networks, but there was also agreement that 
the  revenues  from  such  activities  are  still  minor  compared  to  other  types  of  funding,  and  that 
there is a restricted dynamic in this area. Nevertheless, as one expert noted, some  Länder have 
taken  steps  to  strengthen  HEIs’  possibilities  to  gain  private  revenue.  In  Lower  Saxony,  for 
example,  commercial  accounting  was  introduced  in  HEI  administration  to  allow  institutions  to 
correctly administer private revenues; and foundation universities (i.e., public universities run in 
the  legal  form  of  a  foundation)  were  established  to  facilitate  the  acquisition  of  private  funds. 
Together with the measures pointed out in Section 1.5 (re-regulation of patent exploitation, extra 
state  funding  for  academia-business  collaborations),  these  examples  show  that in the period  of 
investigation,  HEI  governance  concerned  itself  with  enabling  institutions  to  generate  and 
administer private funds, even though this source of income may not be of prime importance. 

The observation that HEIs have limited incentives to maximise private revenue does not imply 
that they do not have incentives to maximise revenue at all – only these incentives are given in 
the context of public funding schemes for the most part, i.e., through performance-based funding 
schemes  or  the  continual  expansion  of  competitive  third-party  funding  through  major  funding 
authorities. 

Other than the introduction of tuition fees, no large-scale political initiatives aiming to increase 
private  revenues  could  be  discerned.  The  intensity  of  collaboration  between  business  and  HEI 
research  is  a matter  of  constant  consideration  for  stakeholders  from  HEIs,  business  and  higher 
education  policy,  but  major  changes  to  cost-sharing  in  this  area  could  not  be  found  using 
administrative  statistical  data.  One  expert  commented  that  the  involvement  of  industry  in  the 
financing of HEI research and technology transfer results from a mutual interest and thus does 
not  necessarily  depend  on  political  initiatives.  The  existence  of  a  number  of  important  public 
funding authorities, like the DFG and the federal state, make it possible for HEIs to attract a lot 
of  external  funds  even  without  a  dominant  industry-orientation,  as  another  expert  pointed  out. 
Even in Fachhochschulen, which typically have close industry-relationships, the share of third-
party funds from the federal state outmatched those from business and industry for the first time 
in 2009 (Statistisches Bundesamt, 2010, p. 126). 

Political incentives for public HEIs to obtain more private income are present but do not appear 
to be a top priority. The fact that tuition fees were introduced only by some Länder and abolished 
after  a  few  years  shows  that  there  is  no  consensus  regarding  the  necessity  of  private  student 
contributions  to  higher  education.  The  availability  of  public  funds  to  launch  large-scale 

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infrastructural programmes, such as the ones mentioned above, appears to reduce the pressure to 
seek private income to satisfy the increasing demand for higher education. 

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4.  HYPOTHESIS  C:  INCREASING  PRIVATE  FUNDING  HAS 

A NEGATIVE EFFECT ON PARTICIPATION    

This  chapter  looks  at  data  relevant  to  Hypothesis  C,  which  states  that  as  private  funding 
increases,  costs  increase  to  students  and  their  families,  which  in  turn  may  have  an  impact  on 
quantitative student demand and on the composition of the student body.  

In order to assess this, it is important to look at:  

 

the real costs to students, including direct and indirect support provided by the state, which 
may discount the gross costs 

  how tuition fees are organised: Who pays and who does not pay? When do you pay  – as a 

 

student or as a ‘successful’ graduate (with a well-earning job)? 
the  overall  trend  of  participation  rates  in  the  country  in  question,  i.e.  expanding,  stable  or 
contracting? 

4.1  Students’ Costs for Higher Education 

Student fees 

The  graph  below  recapitulates  the  changes  of  tuition  fees  per  student  in  the  five  Länder  that 
charged general fees throughout 2007 to 2010. 

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Figure 4.1: Student fees over time in five Länder (average amounts paid per 
year, 2007-2011) 

Note: Constant prices (2011). 
Source: Destatis. 

To evaluate the impact of tuition fees on overall student costs, one can compare the amounts of 
fees to the overall cost of living of students. Table 4.1 presents average annual costs to students 
in  the  categories  learning  materials,  housing,  food,  travel,  clothing  and  other  costs.  The  latter 
category  includes  cost  for  insurance,  medical  care,  telecommunication  and  media  and  leisure 
activities. 

Overall,  the  table  shows  that  the  cost  of  living,  specified  as  the  sum  of  the  costs  represented 
below did not increase in the period of investigation. Rather, a slight tendency of cost reduction 
is visible. As a constraint, it must be added that not all student costs are included in this chart (as 
they are not covered by the HIS/DSW Social Survey), e.g. cost for HEI administrative fees, child 
care, pets, tobacco, debt payment, insurances other than health insurance, and study-related costs 
not spent on learning materials.82 

82 According to Orr, Gwosc, & Netz (2011, p. 134), student cost of living as determined by the German Social 
Survey captures about 86% of total student expenditure under the assumption that student expenditure equals student 
income. 

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010020030040050060070080090020072008200920102011eurosBaden-WürttembergBavariaHamburgLower SaxonyNorth Rhine-Westphalia                                                 
 
National Report for Germany 

Table 4.1: Annual student cost in euros (1994-2009) 

1994 
1997 
2000 
2003 
2006 
2009 

Books 
490 
459 
472 
506 
470 
409 

Housing 
3,284 
3,402 
3,388 
3,555 
3,588 
3,605 

Food 
2,122 
1,959 
1,844 
2,174 
1,918 
1,970 

Travel 
1,038 
987 
1,191 
1,176 
1,070 
942 

Clothing 
887 
843 
855 
779 
652 
632 

Other 
2,153 
1,981 
1,872 
1,436 
1,866 
1,945 

Total 
9,974 
9,630 
9,623 
9,627 
9,564 
9,502 

Note:  The  category  ‘other’  includes  costs  of  health  insurance,  medical  treatment,  telecommunication,  internet, 
television  and  radio  fees,  and  spending  on  leisure  activities,  culture  and  sports.  For  2003,  the  category  ‘other’ 
excludes  spending on leisure  activities, culture and  sports. Figures  refer  to  the  economic  situation  of  unmarried 
students not living with their parents.83 Constant prices (CPI) 2011. 
Source: 15th-19th HIS/DSW Social Survey / own calculations. 

Keeping  the  above  mentioned  restriction  in  mind,  the  result  of  the  above  chart  is  of  direct 
relevance  to  Hypothesis  C  as  well  as  Hypothesis  D,  because  it  implies  that  in  a  general 
perspective,  the  costs  of  student  living  did  not  increase  in  the  period  of  investigation,  except 
through  tuition  fees,  which  are  not included  in the  table  above.  Consequently,  focusing  on  the 
subject of tuition fees is justified for this chapter and the next. For students paying the maximum 
annual  tuition  fee  of  1,000  euros  (excluding administrative  fees),  fees,  as  a percentage  of  total 
student cost, are slightly above 10% based on the figures of 2006/2009. 

Student grants 

Grants for students fall into two major categories, needs-based and merit-based. The needs-based 
system  is  for  the  most  part  regulated  via  BAföG.  BAföG  is  a  mixed  loan/grant  system:  Each 
person receiving BAföG support has to pay back half of the money received through the system 
when he/she has sufficient earnings of his/her own, whereas the other half is non-repayable, i.e., 
a grant. The development of the BAföG system will be discussed in the section on loans below. 
The present section is about merit- and prospect-based grants. 

In Germany there are twelve major student grant organisations. The grant organisations represent 
different  political,  religious  and  ideological  groups.  They  are  responsible  for  selecting  and 
supervising the beneficiaries. The funds for the grants are provided by the  Federal Ministry  of 
Education  and  Research.  The  maximum  annual  amount  a  student  can  get  from  a  grant  is  at 
present  670  euros  for  a  student  in  a  Bachelor/Master  phase  and  1,050  euros  for  a  doctoral 
student.  In  addition,  stipendiaries  receive  book  allowances.  Figure  4.2  represents  the  funds 
provided  by  the  Federal  Ministry  of  Education  and  Research  to  all  twelve  grant  organisations 
over  time  as  well  as  the  number  of  grant-recipients.  The  figures  show  that  the  public  funds 
provided for grants almost tripled between 1998 and 2011 (factor 2.93), and the number of grant-

83 In the period of investigation, between 21% and 24% of all students lived with their parents or relatives (see 19th 
HIS/DSW Social Survey, p. 401). 

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recipients  more  than  doubled  (factor  2.17).  A  steep  increase  is  visible  in  the  latter  half  of  the 
2000s. The government aims to increase investment into the grant systems in the years to come. 

Figure 4.2: Grants for talented students and grant-recipients over time (1998-
2011) 

Note: Grant recipients includes undergraduate and graduate students. Funds for grants: Constant prices (2011). 
Source: Federal Ministry of Education and Research / own calculations. 

The grants issued by the organisation considered above are strictly based on merit and prospects. 
All  grant  organisations  have  talent  as  well  as  social  commitment  as  their  guiding  selection 
criteria. The grant system can thus not be directly related to matters of students’ financial needs, 
and in particular not to the impact of tuition fees. However, the actual monthly amount a grant-
recipient receives is calculated based on the income of his/her parents: Children of parents with 
little or no income receive more than children of parents with more income. This means that on 
the individual level, a needs-based criterion (and thus, a cost-sharing perspective) is incorporated 
into the public grant system. 

Similar  statistics  for  grants  provided  by  the  private  sector  are  not  available.  Based  on  survey 
data,  Konegen-Grenier  &  Winde  (2011,  p.  58)  report  that  in  2009  business  enterprises  funded 
6,130 student stipendiaries, spending 41 million euros. The authors also note that these figures 
are  presumably  too  low,  because  business  enterprises  tend  to  channel  funds  for  grants  to 
intermediary organisations (foundations etc.) or to HEIs instead of giving out grants directly; the 
quoted  survey  is  only  concerned  with  the  latter  category.  Based  on a  series  of  interviews  with 

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02040608010012014016018005,00010,00015,00020,00025,00030,00035,00019981999200020012002200320042005200620072008200920102011million eurosgrant recipientsgrant recipientsfunds for grants(right axis) 
 
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HEI representatives, Konegen-Grenier (2009, p. 55) estimates that the number of grants provided 
by business and industry has been increasing. 

Regardless of these issues, it is apparent that only a minority of German students receive income 
from  merit-based  grants.  The  19th  HIS/DSW  Social  Survey  (p.  14)  reports  that  in  the  period 
2006-2009, about 3% of all students received such grants (period before: 2%). 

Debt levels  

No information could be retrieved concerning debt levels and percentage of students with debts 
at graduation. 

Student loans 

The  most  important  student  loan  system  in  Germany  is  the  state-run  BAföG  system.  As  was 
explained in Section 1.5, BAföG is a mixture of grants and loans. In the standard case, 50% of 
the  financial  support  to  an  individual  is  provided  as  a  grant,  whereas  the  other  50%  is  a  loan. 
Based on this assumption, BAföG-as-loan will be portrayed in the following. 

Figure 4.3 shows a non-linear pattern for both the number of recipients and the absolute amounts 
of  BAföG  distributed.  The  increases  in  the  early  2000s  are  basically  due  to  reforms  that 
facilitated  access  to  BAföG  support.  Except  for  a  drop  in  the  years  2005-2007/08,  BAföG 
support has increased since then. The average BAföG loan per person and month increased from 
386  euros  in  1995  to  445  euros  in  2010  (constant  consumer  prices  2011).  When  relating  the 
number of BAföG recipients to the total number of students, one sees that across the period of 
investigation, between 19% and 23% of all students benefitted from BAföG system. 

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Figure 4.3: Student BAföG loans and student BAföG recipients (1995-2010) 

Note: Recipients of partial and full BAföG support summated. Constant prices (2011). 
Source: Destatis / own calculations.  

To  see  whether  BAföG  support  has  kept  up  with  the  expansion  of  the  HEI  system,  one  can 
compare BAföG support funds with student numbers. From this macro-perspective, one can see 
that after a critical phase in the latter half of the 1990s, when student numbers were growing but 
BAföG  support  was  decreasing,  BAföG  support  has  indeed  kept  up  with  the  growth  of  the 
system: Between 1995 and 2010, BAföG support grew by 59% in constant prices, whereas the 
number  of  students  in  the  same  period  grew  by  19.6%.  Since  BAföG  loans  are  usually 
supplemented  by  a  grant  of  the  same  amount,  this  conclusion  carries  over  to  the  needs-based 
grants system as well. 

As  with the merit-based grant system, it is important to stress that BAföG is not linked in any 
way to the charging of tuition fees. The BAföG  funds are jointly provided by the federal state 
(65%) and all  Länder (35%), and the system dates back to a time when general tuition fees at 
public  HEIs  were  prohibited  in  public  HEIs  in  Germany.  When  fees  were  introduced  in  some 
Länder,  executive  and judiciary  bodies  made  it  clear  that  BAföG  support  was  not  going  to  be 
increased  because  of  the  requirement  to  pay  fees,  pointing  out  that  other,  specialised  loan 
providers were available to cover the cost of fees (see below). However, all fee-charging Länder 
introduced  a  regulation  according  to  which  the  sum  of  debt  accumulated  through  BAföG  loan 
and loans taken out with a state-owned bank to cover tuition fees is cut at a certain limit, usually 
15,000 euros (except North Rhine-Westphalia: 10,000 euros, and Hamburg: 17,000 euros).  

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02004006008001,0001,2000100,000200,000300,000400,000500,000600,000700,0001995199619971998199920002001200220032004200520062007200820092010million eurosrecipientsnumber of recipientsBAföG as loan(right axis) 
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BAföG is by far the most widespread student loan type in Germany, which can be explained by 
its history as well as its attractive conditions: The loan is interest-free and coupled with a grant. 
Nevertheless,  there  are  other  loan  offers  particularly  aimed  at  students.  The  Kreditanstalt  für 
Wiederaufbau (KfW), a state-owned bank, has been offering ‘education loans’ for students since 
2000.  The  maximum  loan  is  300  euros  per  month  for  a  period  of  at  most  24  months.  Länder 
which  introduced  tuition  fees  in  2006/2007  all  established  special  loans  for  students  covering 
their fees, some of them in cooperation with the KfW. Other banks, public and private, have been 
providing  study  loans  as  well.  The  Centre  for  Higher  Education  (CHE)  has  been  publishing 
annual  evaluations  of  study  loan  providers  since  2006  (most  recently:  Müller,  2013).  These 
evaluations show that there is a variety of banks and funds offering loans to cover the costs of 
living or, in more specialised offers, costs of tuition fees. One expert interviewed for this study 
commented that the introduction of tuition fees in several Länder catalysed the development of a 
student  loan  system  across  the  country,  even  though  not  all  offers  are  aimed  at  fee-paying 
students. 

According  to  the  17th  HIS/DSW  Social  Survey,  only  1%  of  the  ‘typical’  student  population 
(unmarried, living away from their parents) took out a loan with the KfW in 2003. In 2006, the 
percentage had increased to 1.5%, and 0.8% of the normal student population reported to have 
taken out a loan with another bank. In 2009, the number of students taking out KfW ‘education 
loans’ had dropped again, but 3% had now taken in a ‘study loan’ (another product offered by 
the KfW), and 1% had taken out a loan with another bank. In fee-charging Länder, 11% of the 
student population took out a loan between 2006 and 2009 to cover tuition fees (19th HIS/DSW 
Social Survey, p. 24). 

Indirect assistance 

The term ‘indirect assistance’ is used here to subsume any type of public expenditure from which 
students benefit but which is not provided in the form of loans or grants. The two most important 
elements in this respect are child benefits and reductions in, or exemptions from health insurance 
contributions (see Schwarzenberger & Gwosc, 2008). 

As elaborated in Section 1.4, child benefits are granted for parents of studying children below the 
age of 27 (until 2007) or 25 (from 2007 onwards). Data pertaining to total sums spent on students 
are  available  for  2004  (from  Schwarzenberger  &  Gwosc,  2008)  and  for  2005-2010  from  the 
incumbent revenue authorities. Data for earlier years are not available. 

Data on benefits from reduced health insurance and for exemption from health insurance were 
calculated by the authors using a method proposed by Schwarzenberger & Gwosc (2008): It was 
assumed that state subsidies for those students who are insured on a non-contributory basis equal 
the minimum amount a voluntarily insured person must pay. For those students who pay reduced 
contributions (basically students older than 25), it was assumed that the state subsidies amount to 
the difference between the minimum amount for voluntarily insured persons and the amount the 
students  have  to  pay.  Both  of  these  monetary  amounts  were  multiplied  with  the  estimated 
number  of  students  insured  in  the  one  or  the  other  category  in  order  to  obtain  the  absolute 

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amounts of state subsidies. The estimates of shares of students insured in either category  were 
based on the figures for 2004 taken from Schwarzenberger & Gwosc (2008).  

Figure  4.4  shows  that the  expenditure  on  non-contributory  health  insurance  increases  by  about 
54%  between  1998  and  2010.  Within  the  same  time  period,  the  total  number  of  students 
increased by about 23%. The disproportionate growth of expenditure on non-contributory health 
insurance is due both to increasing insurance costs and to a rising share of students benefitting 
from this type of assistance. 

The pattern for expenditure on child benefit for parents of students is non-linear. A decrease of 
about 18% is observable in 2008, which can be attributed to the lowering of the eligible age of 
students  from  27  to  25.  The  increased  spending  in  the  years  following  2008 is  due  both  to  an 
increased number of recipients and increases in the monthly benefits. 

Figure 4.4: Public expenditure on reduction / exemption from health insurance, 
child benefit and on student services (Studentenwerke) (1995-2010) 

Note: Data on child benefit and reduced health insurance only available from 2005 onward. Constant prices (2011). 
Source: Bundesagentur für Arbeit (child benefit), Federal Ministry of Health (health insurance) / own calculation. 

Total student cost 

The following graph summarises the central findings of this chapter by representing three types 
of student costs for the years 2005-2010 (for which all necessary data were available): 

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02004006008001,0001,2001,4001,6001,8002,0001995199619971998199920002001200220032004200520062007200820092010million eurosexpenditure on free health insuranceexpenditure on child benefitexpenditure on reduced health insuranceexpenditure on Studentenwerke 
National Report for Germany 

Total  costs  given  as  the  average  cost  of  living  of  students  plus  the  average  amount  of  fees 

paid 

Costs  minus  public  grants  (BAföG  and  grants  for  talented  students)  and  student  assistance 

(child benefit) 

Costs  minus  grants  and  assistance  minus  public  loans  (BAföG  and  KFW  education  loan 

Bildungskredit) – also called ‘out of pocket’- costs. 

Figure 4.5 shows that both annual gross and net costs for students have increased by about 500 
euros,  from  8,678  euros  in  2005  to  9,172  euros  in  2010.  The  largest  part  of  the  increase  took 
place  between  2005  and  2007  and  can  clearly  be  traced  to  the  introduction  of  tuition  fees  in 
several Länder. After 2007, the pattern is almost stable. The pattern for costs minus grants and 
benefits is similar, aside from a decrease after 2008 (from 8,137 euros in 2008 to 7,914 euros in 
2010).  Likewise  the  costs  minus  grants,  benefits  and  repayable  loans  also  decrease  slightly 
within the same period. The overall decrease in costs after 2008 in the latter categories are due to 
decreasing costs of living, but also to rising BAföG and child benefit expenditures during a time 
when tuition fees remained relatively stable. 

Figure 4.5: Annual student costs per average student (2005-2010) 

Note: Student cost of living for 2005, 2007, 2008 and 2010 interpolated from 2003, 2006 and 2009 Social Survey 
data assuming linear progression of cost. Constant prices (2011). 
Source:  17th  –  19th  HIS/DSW  Social  Survey  (cost  of  living)  /  Destatis  (tuition  fees)  /  Bundesagentur  für  Arbeit 
(BAföG) / BMBF (grants for talented students) / KFW (education loans) / own calculations.  

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01,0002,0003,0004,0005,0006,0007,0008,0009,00010,000200520062007200820092010eurosstudent cost(cost of living and fees)student costminus grants and benefitsstudent cost minus grants,benefits and loans 
 
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When aggregated, public grants and loans amount to 16% to 19% of the total student costs in the 
years 2005 to 2010. Also of note is the fact that average student income through the public grant 
and assistance system (BAföG grants, grants for talented students and child benefit) amounts to 
more  than  double  the  average  sum  of  costs  through  tuition  fees.  However,  as  was  pointed  out 
earlier, care must be taken in drawing such comparisons, since the grant systems and fee systems 
are  not  interconnected,  neither  in  administrative  nor  in  political  terms,  and  the  high  level  of 
aggregation used here makes it impossible to draw inferences about how these systems effect the 
financial situation of individual students.  

In  order  to  see  how  students  actually  deal  with  rising  costs  caused  by  tuition  fees,  the  19th 
HIS/DSW  Social  Survey  (p.  24)  includes  survey  data  on  how  students  paying  fees  cover  the 
additional cost: The majority covers fees entirely (41%) or partly (18%) with parental financial 
assistance.  The  second-largest  group  covers  fees  through  their  own  income  entirely  (9%)  or 
partly (21%). Some students use savings to cover fees entirely  (24%) or partly (9%), and 11% 
use a special loan to cover the fees. 

Relative earnings 

Finally,  the  question  of  whether  the  cost  of  studying  is  justified  by  the  earnings  realised  in  a 
subsequent  employment  will  be  investigated.  Assuming  that  the  basic  choice  with  respect  to 
employment is whether to take up higher education studies or to enter a profession which does 
not  require  such  studies,  the  relevant  comparison  is  between  earnings  of  different  populations 
with income, as does e.g. the OECD’s ‘Education at Glance’ series. The reference case (=value 
100)  is  the  earnings  from  employed  persons  with  a  secondary  or  post-secondary,  non-tertiary 
education.  Figure  4.6  represents  the  results  for  employed  persons  with  tertiary  education  in 
Germany. The data show that at all times, the relative earnings of a tertiary education are clearly 
higher  than  an  alternative  non-tertiary  education.  The  gap  between  the  two  alternatives  even 
widens  over  time.  One  can  conclude  from  this  that  from  an  economic  point  of  view,  higher 
education studies have become a more attractive choice in the period of investigation. 

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Figure 4.6: Relative earnings of persons with a tertiary education (1997-2011) 

Note: Data indexed to earnings of a person with secondary and post-secondary, non-tertiary education (=100). 
Source: OECD Education at a Glance. Data for 2001 missing.  

The  OECD  data  presented  above  do  not  distinguish  between  fields  of  study.  Consequently,  it 
might  be  the  case  that  graduates  of  some  fields  of  study  benefit  more  from  the  increase  in 
relative  earnings  than  others.  This  matter  cannot  be  fully  clarified  using  the  available  data. 
Results  from  a  HIS-graduate  survey  (Grotheer,  Isleib,  Netz,  &  Briedis, 2012)  conducted  every 
three  years  show  that  there  are  differences  between  fields  of  study  in  terms  of  earnings  (most 
notably between graduates of arts and humanities and educational sciences on the one hand and 
engineering and health on the other hand), but that the relative differences in income five years 
after graduation remain relatively stable throughout surveys conducted between 1998 and 2010. 

4.2  Participation Rates 

A graph charting participation rates for Germany as a whole was given in Chapter 1, Figure 1.3. 
It  shows  that  transition  from  secondary  school  decreased  in  the  first  half  of  the  2000s  and 
increased again in the second half. This development is relevant here if it can be shown that the 
introduction  of  tuition  fees,  and  thus  the  increase  in  private  funding,  acted  as  a  trigger. 
Investigating this in detail is rather complex for several reasons, the two most important being a) 

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020406080100120140160180199719981999200020012002200320042005200620072008200920102011 
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changes  in  the  share  of  persons  attaining  university  entrance  qualifications  (see  Figure  1.2), 
which makes participation rates per se an unreliable indicator of propensity to enrol at an HEI, 
and  b)  a  pre-existing  tradition  of  intranational  study  migration  for  non-cost-related  reasons, 
which makes looking at transition rates per Land inappropriate.  

A simple, if somewhat indirect, way to approach the issue is to look at the ratios of new entrants 
in fee-charging and non-fee charging Länder before, during and after the introduction of tuition 
fees in some Länder. The reasoning is as follows: If after 2006/2007 the proportion changes in 
favour of the Länder not charging tuition fees, then this suggests that the decrease in transition 
we see before and during this period can at least partly be attributed to the introduction of fees. 
Figure  4.7  shows  this proportion  (as the  total  of  domestic  and  international  students),  with  the 
national  transition  rates  overlaid.  We  see  that  the  share  of  entrants  in  fee-charging  Länder 
decreased by 1.8% between 2005 and 2007, but recovered in the years after and reached a new 
high in 2009, with a continual increase in the years after.84  

Figure 4.7: Share of new entrants in fee-charging and non-fee-charging Länder 
(2002-2012) 

Note: Hesse and Saarland excluded. 
Source: Destatis / own calculations. 

84 The number of new entrants in fee-charging Länder benefitted from a one-time increase in 2008/2009, when 
Baden-Württemberg upgraded its professional academies (Berufsakademien) to higher education institutions (Duale 
Hochschule). 

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67.8%67.6%67.5%68.1%67.7%66.3%66.7%68.0%69.5%72.1%71.9%32.2%32.4%32.5%31.9%32.3%33.7%33.3%32.0%30.5%27.9%28.1%77.8%77.2%74.4%72.5%69.9%72.0%72.0%0%10%20%30%40%50%60%70%80%90%100%20022003200420052006200720082009201020112012fee-charging Ländernon-fee charging Ländertransition rates                                                 
 
National Report for Germany 

This result suggests that the introduction of fees could have played a role in the drop of transition 
rates in the middle of the 2000s, although the fact remains that transition rates had started to go 
down  years  before  general  tuition  fees  were  even  debated,  and  the  changes  in  question  were 
rather  small  in  absolute  terms  (1.8%  of  new  entrants  equals  roughly  5,000  individuals). 
Additionally,  and  curiously,  the  trend  between  the  groups  reversed  after  a  short  time  although 
there  were  no  more  substantial  changes  to  the  fee  systems.  The  same  pattern  (parallelism  of 
increase  in private  funding  and decrease  in  higher  education  participation,  but  only  for  a  short 
stretch  of  time)  is  also  observed  in  some  studies  focussing  on  the  number  of  international 
students coming to fee-charging Länder (see Section 4.3), and in Austria after the introduction of 
fees in 2001 (although much more pronounced). 

Due to the relatively short period of time during which some public HEIs charged fees, and due 
to  the  simultaneity  of  this  phenomenon  and  other,  related  developments  (like  the  Bologna 
reform), it is difficult to arrive at definite conclusions as to whether fees deter potential students 
from enrolling based on standard administrative data. A number of studies have been carried out 
on this issue, but they have not resulted in unified findings: 

  Heine,  Quast,  &  Spangenberg  (2008)  report  survey  data  from  the  2006  cohort  of 
university  entrance  qualification  holders.  They  conclude  that  the  share  of  university 
qualification entry holders not taking up studies due to tuition fees is between 1.4% and 
4.4%, equalling between 6,000 and 18,000 persons (Heine, Quast, & Spangenberg, 2008 
p. 15).  

  Hübner (2009) analyses data from the Federal Statistical Office. He investigates changes 
in enrolments between 2006 and 2007 and concludes that a fee-induced decline in first-
year  students  by  about  2.74%  across  the  country  (equalling  5,000  students)  can  be 
determined  using  statistical  methods.  For  fee-charging  Länder,  Hübner  estimates  a 
deterrent effect of at least 6.9%. 

 

  Based  on  survey  data  with  secondary  school  graduates  from  between  2006  and  2008, 
Heine  &  Quast  (2011,  p.  58)  calculate  that  between  3.6%  and  5.9%  of  all  secondary 
school graduates of the 2008 cohort (in absolute numbers: between 14,000 and 26,000) 
will  not  take  up  higher  education  studies  due  to  the  financial  burden  caused  by  tuition 
fees.  
In a study on the effects of tuition fees in Bavaria, Gensch and Raßer (2011) report that 
the  introduction  of  fees  in  Bavaria  did  not  result  in  a  sustained  decline  of  enrolments. 
Monitoringbeirat  (2011)  likewise  report  that  in  Baden-Württemberg  like  in  other  fee-
charging  Länder,  enrolment  ratios  did  not  decrease  faster  than  in  non-fee-charging 
Länder. Niedersächsisches Ministerium für Wissenschaft und Kultur  (NMWK, 2010, p. 
210) also reports that no decline in demand for higher education was observable after the 
introduction of fees. 

  Helbig, Baier, & Kroth (2012) base their study on the same data source as Heine & Quast 
(2011).  Using  a  differences-in-differences  statistical  approach,  they  come  to  the 
conclusion that the propensity to enrol at an HEI is not significantly lower in fee-charging 
Länder than in non-fee-charging Länder. 

  Quast, Spangenberg, Hannover, & Braun (2012) use survey data from university entrance 
degree  holders  to  examine  whether  the  general  likelihood  to  study  differs  between 

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that 

university entrance qualification holders before and after the introduction of fees in fee-
paying  students.  They  find 
to  study  does  not  decrease 
disproportionally  in  fee-charging  Länder  compared  to  non-fee-charging  Länder.  The 
authors conclude that the parallelism between the decreasing likelihood to study and the 
introduction of tuition fees in several Länder could be explained by a ‘general effect’ of 
uncertainty which spread across the country after some Länder chose to charge fees, and 
which led to a general decrease in the propensity to study. 

likelihood 

the 

  Hauschildt et al. (2013, pp. 45-47) show that propensity to enrol at an HEI declined in the 
years  following  the  introduction  of  general  tuition  fees  (2006-2010),  but  they  also 
observe that this tendency affected fee-charging and non-fee-charging Länder alike, and 
that  a  causal  influence  of  tuition  fees  on  this  trend  can  therefore  not  be  deduced. 
Nevertheless,  the  authors  suggest congruence between  the  declining  likelihood  to  study 
and survey results (discussed in Heine & Quast 2011) indicating that a certain percentage 
of potential students refrain from studying due to the financial burden caused by tuition 
fees. They conclude that the introduction of fees in some  Länder may have raised cost-
awareness of potential students in all  Länder and therefore also may have caused some 
students to refrain from enrolling at an HEI. 

4.3  Composition of the Student Body 

Continuing with the notion that tuition fees were the most important change in student cost in the 
period  of  investigation,  this  section  mainly  focusses  on  whether  and  how  the  introduction  of 
tuition fees affected different social groups. 

Given the assumption that some student groups would be explicitly disadvantaged by having to 
pay  fees,  all  Länder  in  which  general  tuition  fees  were  introduced  established  rules  for  the 
exemption from fees for special groups. Exemptions were granted for practical reasons (e.g. if a 
student passed a semester abroad to serve an internship), but especially in order to prevent social 
disadvantages.  The  definition  of  the  latter  group  varies  across  Länder;  most  of  them  include 
students caring for their children or with care-dependent relatives, disabled students, and students 
from large families. In Baden-Württemberg, the latter criterion was defined so that students with 
two  or  more  siblings  studying  and  paying  fees  would  be  exempt  from  fees.  As  was  explained 
above, the mere financial situation of a student as such was not a criterion of being exempt from 
fees, because it was argued that the BAföG system and additional loans provided by state banks 
offered sufficient opportunities to secure the cost of living even if a student had to pay fees. 

Figure 4.8 gives an overview of the shares of students who were exempt from fees in three fee-
charging  Länder  from  which  data  were  available.  The  chart  shows  a  considerable  degree  of 
variation between Länder: Whereas Lower Saxony had a comparatively low share of exemptions 
(between  9%  and  16%),  the  figures  are  about  twice  as  high  in  Bavaria.  Baden-Württemberg 
shows  a  peculiar  pattern:  Exemptions  increase  sharply  in  the  winter  semester  2008/09  as  a 
consequence of a regulation introduced that semester, exempting students with two or more fee-
paying siblings. With this regulation in place, exemptions amounted to no less than 43% of all 
students.  

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Figure 4.8: Share of students exempt from fees in three Länder (2006/7-
2009/10) 

Source:  Gensch  &  Raßer,  2011  (Bavaria);  Monitoringbeirat,  2011  (Baden-Württemberg);  NMWK,  2010  (Lower 
Saxony). 

Further data for Bavaria show that of all students exempt from fees, about 70% are exempt for 
social  reasons.  For  Baden-Württemberg,  the  share  of  students  exempt  for  social  reasons  was 
around 50% in the first three semesters charted in the graph above, and rose to more than 80% in 
2009 when the law was introduced that exempted students with two or more fee-paying siblings 
from  fees.  For  Lower  Saxony,  the  share  of  students  exempt  for  social  reasons  is  roughly  two 
thirds (19th HIS/DSW Social Survey, p. 277). 

Table 4.2 shows how  fee exemptions for social reasons affected different social groups in five 
Länder. The table shows that across Länder, there is no direct correlation between social status 
as defined by the HIS/DSW Social Survey and being exempt from fees for social reasons. This is 
essentially because the laws concerning exemption from fees for social reasons focus on concrete 
conditions  in  which  a  person  is,  e.g.  caring  for  a  sick  family  member  or  acting  as  an  equal 

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0%5%10%15%20%25%30%35%40%45%50%percentage of students not paying feesBaden-WürttembergBavariaLower Saxony 
National Report for Germany 

opportunity  commissioner,  whereas  the  definition  of  social  group  as  used  by  the  HIS/DSW 
Social Survey is focussed on parents’ educational degree and professional status. 

Bavaria 

Hamburg 

Social group 

Baden-
Württemberg 

Table 4.2: Percentage of students exempt from fees for social reasons among all 
students, by social groups in five Länder (summer semester 2009) 
North 
Rhine-
Westphalia 
5 
3 

Low 
Mediate 
Higher-
5 
intermediate 
4 
High 
3 
Total 
Note: Social status (low, mediate, higher-intermediate, high) is determined by a combination of father’s / mother’s 
highest educational qualification and professional status, see 19th HIS/DSW Social Survey, p. 564. 
Source: 19th HIS/DSW Social Survey.  

Lower 
Saxony 

19 
24 
19 

32 
35 
34 

14 
16 
14 

Average 

14 
15 

37 
31 

14 
12 

3 
4 
4 

3 
4 
4 

7 
5 

5 
1 

The literature on social impacts of tuition fees, which will be reviewed below, mostly focusses 
on how (potential) students from different social backgrounds are affected by tuition fees in their 
study  choice.  The  standard  criterion  used  to  assign  students  to  a  social  background  is  the 
educational status of their parents. The literature thus represents a different perspective on social 
composition when compared to the laws on tuition fees. 

  Heine  et  al.  (2008)  observe  that  social  inequalities  in  enrolment  increased  visibly, 
although  not  (technically  speaking)  significantly  in  the  year  (2006)  in  which  general 
tuition fees were introduced in two Länder and enacted for the next year in five Länder. 
The  results  are  based  on  survey  results  showing  that  between  2004  and  2006  the 
probability of taking up higher education studies decreases more markedly for university 
entrance  qualification  holders  with  at  least  one  parent  without  an  HEI  degree  than  for 
those having at least one parent with an HEI degree. However, the authors also point out 
that  a  direct  causal  link  between  the  introduction  of  tuition  fees  and  the  probability  to 
study  cannot  be  established  due  to  other  interfering  factors,  in  particular  study  reforms 
(Heine et al. 2008, p. 52). 

  The 19th HIS/DSW Social Survey includes a section on student financing of tuition fees. 
It does not deal directly with the impact of tuition fees on students from different social 
backgrounds,  but  it  discusses  how  students’  judgements  concerning  their  financial 
security  during  their  studies  varies  between  students  from  different  social  backgrounds. 
The result is that the lower a student’s social background, the less secure he/she judges 
his/her  financial  situation  (19th  HIS/DSW  Social  Survey,  p.  243).  However,  the  results 
also  show  that  between  2006  and  2009,  judgements  of  financial  security  increased 
throughout  social  groups.  From  this  contradictory  finding  one  may  conclude  that  the 

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introduction of tuition fees in 2006/07 did not have a marked influence on judgements of 
social security. 

  Monitoringbeirat (2011, p. 14) compares the social composition of fee-paying and non-
fee-paying students and finds that in the fee-charging Länder, the share of students from 
low and medium social backgrounds did not decrease between 2006 and 2009, and that in 
Baden-Württemberg, the share of students from lower social backgrounds even increased 
by 2%. 

  Gensch & Raßer (2011, pp. 47-75) report that in Bavaria (a fee-charging Land) the social 
composition of the student body did not alter considerably after the introduction of tuition 
fees. One  effect the authors do observe is a slight decline in the share of  students from 
higher social backgrounds between 2006 and 2009. The share of students from lower and 
medium social backgrounds increased in the same period. 

  Heine  &  Quast  (2011)  come  to  different  conclusions  with  respect  to  the  national 
situation: They find that deterrent effects of fees are more prominent with women, with 
persons from a non-academic background, with persons who graduated from a vocational 
school, with persons with lower grades and with persons who judge their career prospects 
as medium or bad (Heine & Quast 2011, pp. 59-60). Taken together, these results would 
entail a restriction of the social diversity of the student body caused by tuition fees over 
time.  An  increased  cost-sensitivity  specific  to  women  is  also  a  reason  for  increasing 
social selectivity of universities according to Lörz (2013). 

  Quast et al. (2012) work with data from the same panel as Heine et al. (2008) and Heine 
&  Quast  (2011),  in  which  university  entrance  degree  holders  are  surveyed.  The 
propensity to study is determined by asking whether respondents have already enrolled at 
an HEI or have the firm intention to do so. The authors find that since the introduction of 
fees  in  some  Länder,  a  general  decline  in  the  likelihood  to  study  has  taken  place,  and 
explain  that  this  decline  is  caused  by  an  increase  in  the  general  cost-awareness  of 
potential  students,  which  may  have  had  deterrent  effects.  They  also  observe  that 
likelihood  to  study  decreased  more  with  women  and  with  persons  from  lower  social 
backgrounds. Following the authors’ line of argument, one can infer that tuition fees have 
the potential to aggravate the social disparities in the German higher education system. 

In Germany, international students do not (with few exceptions) pay additional fees for attending 
German universities, irrespective of where they come from. This also means that German higher 
education was free to foreign students until the introduction of the tuition fees in some  Länder. 
For  this  reason,  it  is  also  interesting  to  examine  if  foreign  students  were  affected  by  this  fee 
change. The question whether the introduction of tuition fees caused fewer international students 
to come to a German HEI to study is dealt with in Gensch & Raßer (2011) and Monitoringbeirat 
(2011). Gensch & Raßer (2011, p. 3) report that in Bavaria, the share of international students 
dropped  by  roughly  7%  after  the  introduction  of  fees,  and  state  that  this  can  be  linked  to  the 
rising cost caused by fees which students are not willing to pay.  Monitoringbeirat (2011, p. 21) 
reports that in Baden-Württemberg, the evolution of the share of international students does not 
differ significantly from Germany as a whole. The authors point out that there is a national trend 
towards  smaller  shares  of  international  students,  and  that  this  trend  started  well  before  the 
introduction  of  tuition  fees  in  some  Länder.  DAAD  &  HIS-HF  (2011,  p.  8)  shows  that  for 
Germany  as  a  whole,  the  general  evolution  of  international  student  numbers  is  an  increase  of 

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about 80% between 2000 and 2006 and stagnation between 2006 and 2010, with a minor drop in 
2008.  This  general  trend  is  mirrored  quite  closely  by  most  individual  Länder,  fee-charging  or 
not,  although  a  more  dynamic  increase  is  visible  for  most  Eastern  German  Länder  (DAAD  & 
HIS-HF 2011, p. 11). 

4.4  Completion Rates 

The literature on completion / dropout rates is surveyed below, and comments from the experts 
are reported. 

  Heublein, Hutzsch, Schreiber, Sommer, & Besuch (2009) discuss results from a study in 
which  HEI  dropouts  from  2008  were  surveyed.  The  authors  report  that  19%  of  all 
dropouts report that financial difficulties were the main reason for dropping out (in 2000, 
the  rate  was  18%).  39%  of  all  dropouts  named  financial  difficulties  as  one  reason  for 
terminating 
is  a  difference  between  universities  and 
Fachhochschulen: Whereas 17% of dropouts of universities name financial difficulties as 
the main reason for terminating, the percentage is 27% at Fachhochschulen. The authors 
link this difference to differences in social composition of the student body in these two 
types  of  HEIs.  Overall,  the  study  shows  that  financial  difficulties  are  an  important 
influencing  factor  of  success  in  studying,  although  the  influence  of  fees  in particular  is 
not a subject of this study. 

studies.  There 

their 

  Heublein,  Richter,  Schmelzer,  &  Sommer  (2012)  study  changes  in  completion  rates 
between the 2006/07 enrolment cohort and the 2004/05 enrolment cohort. They find that 
with the Bachelor students, dropout rates increased by 3 percentage points from 25 to 28, 
a  change  which  is  mostly  due  to  universities,  where  the  dropout  rate  for  Bachelor 
students is 35% (Fachhochschulen: 19%). The study also looks at different fields of study 
and  finds  that  dropout  rates  in  engineering  are  particularly  high  (50%  for  Bachelors  at 
universities for the 2006/07 cohort), whereas they are much lower (11%) with students in 
Staatsexamen  (degrees  with  state  examinations)  programmes.  The  authors  discuss  the 
results  exclusively  in  the  context  of  the  Bologna  reforms  and  how  they  affect  different 
study programmes and HEI types; no distinction is made between fee-charging Länder / 
HEIs and non-fee-charging Länder / HEIs. 

According  to  several  interviewed  experts,  any  changes  in  duration  (and  mode)  of  study  are 
probably  more  closely  related  to  the  Bologna  reform,  particularly  the  introduction  of  the 
Bachelor/Master system, and to performance-based funding schemes in which HEIs are paid per 
numbers of graduates or students in their standard period of study, than to cost-sharing-related 
factors.  

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4.5  Evaluation 

Overall,  clear  evidence  supporting  the  deterrent  effects  of  increasing  private  revenues  on 
participation could not be found in this review.  

The  most  important  cost-sharing  related  change  in  student  financing  was  the  introduction  of 
tuition  fees  in  some  Länder.  The  data  show  no  unambiguous  effects  on  participation  levels  in 
fee-charging  Länder,  but  literature  was  also  reviewed  which  provided  more  in-depth 
investigations.  The  findings  of  current  research  on  this  question,  however,  deliver  no  clear 
picture. Whereas most authors find that a certain (low) percentage of students are deterred from 
studying because of the obligation to pay tuition fees, others find no such effects. Those authors 
who  find  a  deterrent  effect  of  tuition  fees  specify  this  effect  as  concerning  between  1.4%  and 
5.9% of university entrance qualification holders, depending on the source and reference year. 

The discussion of social effects of tuition fees showed that women and persons from lower social 
backgrounds are generally more cost-sensitive than other social groups, and are therefore more 
susceptible to deterrent effects caused by tuition fees. Analyses are complicated by the fact that 
other profound changes in the organisation of studies were on-going in the same period of time: 
The implementation of the Bologna reforms was at its peak in the middle of the 2000s. 

This chapter also showed that, aside from tuition fees, costs for students did not increase in the 
period of investigation. Specifically the cost of living as specified by the most important types of 
expenditure did not increase, and total public expenditure on support systems for students did not 
decline. Since the fees themselves were not very high and large shares of the student population 
in  the  fee-charging  Länder  were  exempt,  this  could  explain  the  small  effects  of  the  fees  on 
participation.  

No  clear  relationship  could  be  discovered  between  changes  in  completion  rates  and  the 
introduction  of  tuition  fees.  This  is  partly  due  to  the  short period  of  time during  which tuition 
fees were charged in the Länder concerned, and presumably, once again, to the relatively small 
share of tuition fees in total student costs. The interviewed experts agreed that the study reforms 
were  probably  more  important  in  bringing  about  changes  in  this  area  than  the  introduction  of 
tuition fees – a conclusion which is mirrored by the literature, which also focusses on the effects 
of study reforms on dropout rates, time-to-completion etc. 

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5.  HYPOTHESIS  D:  INCREASING  PRIVATE  FUNDING 
AFFECTS  STUDENT  CHOICE  OF  HOW  OR  WHAT  TO 
STUDY 

This  chapter  looks  at  data  relevant  to  Hypothesis  D,  which  states  that  as  private  funding 
increases,  costs  increase  to  students  and  their  families,  which  in  turn  will  have  an  impact  on 
students’ choice of how and what to study (but not necessarily on the share of students studying). 
Accordingly, this section looks at these topics: have student age, location or field of study and 
time to completion changed over time in relation to cost-sharing? 

5.1  Student Study Patterns 

This  section  examines  changes  in  study  patterns  based  on  changes  in  time  spent  on  studying 
during the time enrolled at an HEI, and based on the age of students. 

Time spent on studying 

The average time students spend on studying and employment are represented in Table 5.1: 

Table 5.1: Hours per week spent on studying and employment and share of 
students in employment (1994-2009) 

Hours spent on 
studying 

Hours spent on gainful 
employment 

Share of students in 
gainful employment 

1994 
1997 
2000 
2003 
2006 
2009 
Source: 15th -19th HIS/DSW Social Surveys. 

36 
36 
36 
34 
34 
36 

7 
8 
8 
7 
7 
8 

70 
69 
67 
68 
63 
67 

The data show no substantial changes in the times spent on studying and employment over the 
years. The most interesting question with respect to Hypothesis D is, again, how the introduction 
of tuition fees changed study patterns of fee-paying students. The 19th HIS/DSW Social Survey 
(pp.  278-280)  includes  a  section  investigating  how  fee-paying  students  cover  their  additional 
costs through fees, and finds that the largest share (48%) use income from parents to cover fees 

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fully  or  partially.  The  second  largest  group  consists  of  students  who  use  income  from 
employment to cover the cost of fees (30%). Other students use savings (24%), and a minority 
uses  special  loans  from  state  banks  (11%).  It  is  not  certain,  however,  whether  those  who  use 
income from employment work exclusively to cover the cost of fees, or whether they would also 
work if they did not have to pay fees. The survey also shows (19th HIS/DSW Social Survey, p. 
238) that fee-paying students do not gain a greater share of their total income through work than 
non-fee-paying  students.  One  can  conclude  that  the  introduction  of  fees  did  not  lead  to  a 
significant increase in time spent on employment for the concerned students. 

The  HIS/DSW  Social  Survey  also  investigates  the  share  of  full-time  versus  part-time  students 
based  on  how  much  time  a  student  actually  spends  on  studying  versus  other  occupations,  like 
employment, child care etc. This definition of full-time / part-time is different from the definition 
used in Section 3.2, in which this category was associated with the official status as full-time / 
part-time  student  as  defined  by  the  study  programme  in  which  he/she  is  enrolled.  Part-time 
students are defined by the Social Survey to be those spending less than 25 hours per week on 
study-related activities (i.e., attending lectures or self-study periods). 

With  respect  to  the  actual  time  spent  on  studying,  the  19th  HIS/DSW  Social  Survey  (p.  343) 
finds that the share of students studying full-time (2009: 79%) increased between 2006 and 2009, 
whereas  the  share  of  students  studying  part-time  (2009:  21%) decreased in the  same  period  of 
time – for the first time since 1988. This goes to show that the introduction of tuition fees did not 
lead to an increased share of students studying part-time. On the contrary, the share of students 
studying  full-time  (with  or  without  an  additional  employment)  increased by  4%  between  2006 
and 2009.  Whether  this  tendency  is caused  by  an increasing  desire  to  finish  studies  quickly  to 
save on tuition fees cannot be inferred from the data. The 20th HIS/DSW Social Survey (p. 346) 
shows  that  in  2012,  the  trend  does  not  continue:  The  share  of  students  studying  full-time 
decreased by 1%. 

Distribution of students by age 

Figure  5.1  shows  that  whereas  the  average  age  of  students  decreased by  about  one  year  in  the 
period of investigation, the average age of first-year students roughly stayed the same. An effect 
of  cost-sharing, and  specifically  tuition  fees,  on  the  average  age  of  (first-year)  students  is  thus 
not  observable.  In  particular,  there  is  no  evidence  that  tuition  fees  cause  students  to  choose  a 
non-tertiary education first and delay higher education until they have sufficient means to be able 
to pay tuition fees from their savings. 

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Figure 5.1: Average age of students and new entrants (2000-2010) 

Source: BMBF Data Portal.85 

5.2  Location of Study 

Given the fact that some Länder introduced tuition fees in 2006/07, whereas others did not, one 
could  expect  that  this  led  to  shifts  in  enrolments  as  a  consequence  of  students  avoiding  fee-
charging  Länder.  This  issue  has  been  investigated  in  the  recent  literature.  The  following  text 
surveys the main results. 

  Hetze &  Winde (2010) compare the shares of incoming and outgoing students between 
Länder and  find  that  in the  years  2005 to  2008,  there  are  no  significant changes  in the 
relative  incoming-  versus  outgoing measures  between  Länder  that can  be  related  to  the 
introduction of fees. 

  Jaeger  &  Quast  (2010)  explore  potential  mobility  effects  of  charging  tuition  fees  on 
secondary school graduates from fee-charging and non-fee-charging Länder, and find no 
increased  migration  from  fee-charging  to  non-fee-charging.  An  effect  that  they  did 

85 On-line at http://www.datenportal.bmbf.de/portal/de/K25.gus?rid=T2.5.20#T2.5.20 (24.07.2013). 

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202122232425262720002001200220032004200520062007200820092010age in yearsaverage age of studentsaverage age of first-year students                                                 
 
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observe is a decreased share (by about 4%) of migration from students who earned their 
university-entrance qualification in a non-fee-charging Land to a fee-charging Land. 
  Heine  and  Quast  (2011)  show  that  fees  do  not  cause  secondary  education  graduates  in 
fee-charging  Länder  to  escape  into  Länder  without  fees.  However,  they  report  an 
increased  reluctance  of  secondary  education  graduates  to  move  from  non-fee  charging 
Länder to fee-charging-Länder to study, starting from the period of time when fees were 
introduced. This result is corroborated by the 19th HIS/DSW Social Survey (pp. 63-64).  
  Using  applicant  data  from  the  Central  Office  for  the  Allocation  of  Study  Places, 
Dwenger,  Storck,  &  Wrohlich  (2012,  p.  16)  find  that  university  entry  qualification 
holders from fee-charging states have “a significantly lower probability of applying for a 
university in their home state once tuition fees have been introduced”. They estimate that 
the  probability  of  applying  at  a  fee-charging  HEI  is  reduced  by  roughly  2  percentage 
points for applicants from a Land charging fees. 

  Bruckmeier,  Fischer,  &  Wigger  (2013)  use  administrative  data  to  investigate  how  the 
introduction of fees changes enrolment on the institutional level. They find that overall, 
HEIs  in  fee-charging  Länder  face  an  overall  decline  in  demand  of  between  seven  and 
eight percent (Bruckmeier et al., 2013, p. 27); moreover, they find that the further away 
an  HEI  in  a  fee-charging  Land  is  from  a  non-fee  Land,  the  weaker  the  out-migration 
effect. The authors argue that this finding can be explained by the concept of ‘mobility 
costs’, which are lower for students living near borders. 

  Heine (2008) reports survey data in which students were asked for the reasons why they 
chose  to  study  at  their  present  HEI.  33%  of  the  respondents  in  the  Western  German 
Länder and 77% in the Eastern Länder specified absence of fees as one reason why they 
chose their present HEI. Other, more prominent reasons were, in particular, the selection 
of study programmes and closeness to the student’s home town. 

Besides  these  studies  considering  several  or  all  German  Länder,  there  are  also  a  number  of 
studies each focusing on one specific fee-charging Land: 

  Monitoringbeirat (2011, p. 12) reports that in Baden-Württemberg, a Land charging fees 
since  2007,  incoming  migration  from  non-fee-Länder  did  not  decline,  but  rather 
increased by 4% between 2006 and 2008. Statistisches Bundesamt (2012, p. 29) reports 
that of the five Länder charging fees in 2010, two had a positive incoming-outgoing ratio, 
whereas three had a negative one.  

  Gensch  and  Raßer  (2011,  pp.  33-34/41-42)  report  that  the  share  of  outgoing  students 
from  Bavaria  increased  slightly  since  the  introduction  of  fees  (2007-2009),  and  that 
except for a decrease in 2008, enrolments from students having received their university 
entrance qualification in one of the other Länder increased in Bavaria, except for students 
from Eastern German Länder. They conclude that no clear correlation can be established 
between  the  introduction  of  fees  and  migration  behaviour,  both  in  the  incoming  and 
outgoing directions. 

  Hauschildt  et  al.  (2013)  show  that  in  Lower  Saxony,  a  fee-charging  Land,  the 
incoming/outgoing ratio developed negatively since the introduction of fees in 2006/07, 
but they also point out that this trend began years before the introduction of fees and can 
thus not be directly related to the avoidance of higher costs through fees. 

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In sum, the literature on changes in mobility caused by tuition fees is not conclusive. One finding 
that seems to be supported by most of the literature is that the introduction of fees is linked to a 
slight  decline  in  inward-mobility  from  non-fee-Länder.  The  findings  with  respect  to  the 
behaviour of secondary school graduates from fee-charging Länder are ambiguous. If there is an 
effect on outward-mobility caused by fees, it appears to be in a very low percentage range. 

5.3  Field of Study 

This section looks at changes in enrolment behaviour to examine whether students tend towards 
different  programmes  in  the  face  of  changes  to  cost-sharing.  The  relevant  administrative  data 
used  to  answer  this  question  were  presented  in  Section  3.1,  where  new  entrants  by  field  were 
examined  as  a  proxy  for  supply  of  study  programmes.  No  clear  indications  were  found  that 
tuition fees influence the choice between fields of study. 

The question of whether students are influenced by fees when choosing between fields of study 
is less frequently dealt with in the literature on fees than questions concerning the place of study 
or the decision to study at all. Monitoringbeirat (2011, pp. 23-24) reports that no clear changes to 
enrolment  behaviour  by  field  of  study  could  be  discerned  between  2006  and  2009  in  Baden-
Württemberg, a Land which introduced fees in 2007. In Gensch and Raßer (2011), a decrease of 
students of arts and humanities in Bavaria between 2006 and 2010 amounting to 4% is reported. 
This result is verified by the data presented in Section 3.1. However, as pointed out earlier, it is 
difficult to link such findings to the introduction of tuition fees, since changes of a similar order 
can be observed in non-fee-charging Länder and in different periods of time, too. 

The issue whether tuition fees influence enrolment behaviour was also integrated into the expert 
interview  series.  Several  experts  at  both  the  institutional  and  ministerial  level  reported  that  no 
clear correlation was visible between the introduction of tuition fees and choice between fields of 
study. What is important in this context is that no Land charges/charged differential fees in terms 
of fields of study, i.e., there was a single fee for all students studying at the same HEI, no matter 
which subject they were enrolled in. According to one interviewed expert, by standardising fees 
policymakers explicitly  wanted to prevent tuition fees from influencing individuals’ choices of 
their study subject. 

5.4  Time-to-Completion 

The  question  of  whether  and  how  tuition  fees  have  changed  completion  rates  is  difficult  to 
answer because of the concomitant reforms which aim at shortening study periods (among other 
things).  Figure  5.2  charts  average  length  of  studies  over  time  of  both  Diplom  and  Bachelor 
students  at  fee-charging  versus non-fee-charging  Länder.  Since  Hesse  and  Saarland  introduced 
and  abolished  tuition  fees  during  the  period  of  investigation,  they  do  not  fit  neatly  into  either 
category and were thus excluded from the calculation. 

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The  graph  shows  that  for  Diplom  students,  the  average  length  of  studies  decreased  in  fee-
charging  Länder after  2005  (although  it  remained higher  than in  the  1990s),  which could be  a 
consequence of the introduction of fees, considering that the average length of studies in the non-
fee-charging Länder is higher (the difference is about half a semester). For bachelor students in 
fee-charging  Länder,  the  average  length  of  studies  dropped  by  about  half  a  semester  between 
2008 and 2010, whereas there was no such trend in the non-fee-charging Länder. Whether this 
can  be  related  to  the  introduction  of  fees  is  questionable,  not  least  because  the  students  who 
graduated in 2008-2010 spent most of their studying time without paying fees. 

Figure 5.2: Average length of studies in fee-charging and non-fee-charging 
Länder (1995-2010) 

Note:  Hesse  and  Saarland  excluded.  Länder  were  not  weighted  by  student  numbers  for  calculation  of  average 
values. 
Source: Destatis / own calculations. 

A study that touches on times-to-completion is Heine and Quast (2011). Based on survey data, 
the  authors  report  that  in  2008,  62%  of  the  surveyed  students  intend  to  finish  their  studies  as 
quickly as possible in order to save costs through tuition fees (2006: 66%) (Heine & Quast, 2011, 
p.  63). 18%  (2006:  13%)  report  that  they  will  not  change  the  speed  of  studying  due  to  tuition 
fees. Another group of 17% intends to take up a job in order to pay additional cost caused by fees 
(2006: 20%). One can assume that this strategy will not shorten the duration of studies. 

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02468101214161995199619971998199920002001200220032004200520062007200820092010semestersfee-raising Länder Diplomfee-raising Länder Bachelornon-fee-raising Länder Diplomnon-fee-raising Länder Bachelor 
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5.5  Evaluation 

This Chapter investigated whether changes in cost-sharing lead to changes in study behaviour in 
terms of time spent on studying, age of enrolment, location of study, field of study and time-to-
completion.  An  important  background  assumption,  carried  over  from  Chapter  4,  was  that  the 
crucial event in terms of cost-sharing in the period of investigation was the introduction of fees 
in some Länder in 2006/07.  

A  methodological  constraint  worth  repeating  here  arises  from  the  fact  that  the  introduction  of 
tuition  fees  in  several  German  Länder  coincided  with  other  political  initiatives  likely  to  have 
affected study behaviour.  Interviewed experts most frequently noted the implementation of the 
Bologna reforms and their influence on matters such as average length of study, choice of field 
of study etc. This contextual constraint makes it difficult to come to definite conclusions as to the 
influence of cost-sharing on student behaviour in the German case. 

That  being  said,  the  conclusion  that  emerges  is  that  tuition  fees  had  little  influence  on  the 
observed  aspects  of  behaviour.  The  most  studied  aspect  of  changes  in  study  behaviour  in  the 
German  case  is  location  of  study.  As  the  data  and  literature  review  showed    not  surprisingly 
perhaps  there is evidence that a certain percentage of students from non-fee-charging Länder 
are  deterred  from  moving  to  a  fee-charging  Land  to  study  due  to the introduction  of  fees.  The 
existence  and  significance  of  the  complementary  effect,  i.e.,  secondary-school  graduates  being 
driven  to  a  non-fee-charging  Land  because  of  fees,  is  more  ambiguous.  In  any  case,  it  can  be 
stated  that  fee-charging  Länder  did  not  suffer  a  drastic  decline  in  enrolments  (nor  a 
disproportionate  increase)  in  the  four  years  after  the  introduction  of  fees.  This  can  again  be 
related  to  the  observation  made  in  Chapter  4  that  in  Germany  fees  are  only  a  minor  part  of 
students’ total costs (especially for a large share of students who are supported by their parents), 
so that the behaviour-changing effect of fees is not likely to be pronounced. What is missing in 
Germany  is  an  in-depth,  substantive  study  on  the  effects  of  cost-sharing  on  the  behaviour  of 
certain student types. The available evidence suggests no strong effects, for instance, on students 
from low socio-economic groups. However, Germany is known to have socially selective access 
to higher education (see  Orr, Haaristo, &  Little, 2011) and fees may, relatively speaking, have 
additional effects on this group of students. 

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6.  CONCLUSION 

The analysis of cost-sharing in Germany has shown that the introduction of tuition fees in seven 
Länder  in  the  years  2006/07  was  the  single  most  important  discontinuity  in  the  private-public 
cost-sharing  balance.  Tuition  fees  led  to  a  significant  increase  in  income  of  HEIs,  verifying 
Hypothesis A. However, the introduction of general tuition fees did not entail a radical change in 
the  higher  education  funding  architecture  comparable  to  what  took  place  in  e.g.  England:  For 
universities in fee-charging Länder, the share of income through tuition fees was calculated to be 
in  the  range  between  5%  and  7%  of  HEIs’  total  income;  for  Fachhochschulen,  the  share  was 
higher. Put differently, tuition fees in Germany made an additional contribution to the actual cost 
of higher education in the Länder in which fees were charged. In all Länder, the largest part of 
the growth of the higher education system was accommodated through increases in institutional 
core  funding  for  HEIs  and,  more  recently,  a  special  state  programme  to  fund  additional  study 
places. 

Concerning Hypothesis B, some indications of increased responsiveness were found, but the role 
of  tuition  fees  in  this  development  was  arguably  limited.  From  the  point  of  view  of  HEIs, 
receiving adequate institutional core funding remains the most important factor in covering the 
basic  costs  of  training  students.  Interviewed  experts  stated  that  the  rationale  behind  the 
introduction  of  tuition  fees  was  not  to  generate  responsiveness  through  the  creation  of  new 
programmes and courses, but rather to improve quality in teaching. Two informants reported that 
even though the financial effects of tuition fees were limited, there was  a marked change in the 
attitude of both students and teachers towards a stronger user or ‘customer’ focus. 

One segment of higher education in which public HEIs can charge fees to cover the full cost of 
education is  further  education programmes.  The  study  has  highlighted that  public  HEIs  appear 
nevertheless  reluctant  to  use  this  opportunity.  Several  reasons  for  this  were  discussed,  among 
them  the  fact  that  HEIs  may  not  see  it  as  their  core  task  to  offer  further  education,  and 
disadvantageous framework conditions such as capacity constraints limiting the ability to offer 
further education programmes. 

The growing importance of third-party funding was discussed as the most important change in 
the  financing  structure  of  HEIs.  In  this  area,  HEIs  (particularly  those  with  a  strong  research-
orientation)  do  have  incentives  to  act  strategically  to  maximise  funds.  However,  this 
development is not directly related to the cost-sharing balance in Germany, because the share of 
income  through  public  third-party  funds  has  increased  as  much  as  income  from  private  third-
party funds, with the former making up a larger part of the total income of HEIs.  

Like income through tuition fees, income through third-party funding is tied to performing quite 
specific tasks – mostly the implementation of research projects. For this reason, it cannot take the 
place of institutional core funding, which is largely used to fund teaching activities. Indeed, as 
was  shown  in  Chapter  2,  funding  per  student  did  not  effectively  decrease  in  the  period  of 
investigation even when third-party funds are dropped from the picture. The rationale behind the 

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increase in third-party funding in the German system is to increase efficiency in research through 
competition  and  to  foster  clear  profile  differences  between  institutions.  These  objectives  are 
typical desired outcomes of privatisation in other higher education systems. In Germany, it is the 
government  that  tries  to  encourage  these  processes  by  strengthening  funding  in  a  competitive 
mode. The idea of establishing a state-controlled, quality-oriented competition between HEIs has 
recently been transferred to the realm of teaching: The Quality Pact for Teaching (Qualitätspakt 
Lehre,  2011-2020)  provides  two  billion  euros  on  a  competitive  basis  for  innovative  teaching 
projects. 

Concerning the student side of cost-sharing, the study has shown that the introduction of tuition 
fees was the most notable factor in changing student cost. The complexity of determining effects 
on participation (Hypothesis C) was discussed in Chapter 4. The majority of studies on this issue 
suggest that the effects on participation were relatively minor or even inexistent, a result which is 
often  ascribed to  the  relatively  small  amounts  students had  to pay.  However,  some  studies did 
observe deterrent effects of tuition fees, particularly where cost-sensitive groups are concerned. 
Women and persons from lower social backgrounds were named as examples.  

There  is  only  sparse  evidence  of  behaviour  changes  caused  by  the  introduction  of  fees 
(Hypothesis  D,  Chapter  5).  This  result  might  again  be  linked  to  the  moderate  share  of  fees  in 
students’ total expenditure, and to the fact that in some fee-charging Länder, a large proportion 
of all students were exempt from paying fees. 

It is notable that many of the interviewed experts highlighted that both the introduction of fees 
and their subsequent abolition was a ‘political project’. Indeed, the recent abolition of tuition fees 
was  a  consequence  of  a  change  of  government  in  all  Länder  except  Bavaria86.  Nevertheless, 
without this source of funding additional public funds will have to be provided in order to keep 
funding per student steady. An important context information, however, is that Germany’s total 
spending  on  the  tertiary  education  sector  was  below  OECD-average  throughout  the  period  of 
investigation. 

86 In Bavaria, the government decided to abolish general tuition fees in early 2013, after a petition for a referendum 
had been passed which with some degree of probability would have resulted in the abolition of fees. 

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Deutsche Wissenschaft. 

Heublein, U., Hutzsch, C., Schreiber, J., Sommer, D., & Besuch, G. (2009). Ursachen des 
Studienabbruchs in Bachelor- und in herkömmlichen Studiengängen Ergebnisse einer 
bundesweiten Befragung von Exmatrikulierten des Studienjahres 2007/08. Hannover: HIS 
GmbH. 

Heublein, U., Richter, J., Schmelzer, R., & Sommer, D. (2012). Die Entwicklung der Schwund- 
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der Basis des Absolventenjahrgangs 2010. Hannover: HIS GmbH. 

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Hochschulrektorenkonferenz. (2011). Statistische Daten zu Bachelor- und Masterstudiengängen 

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Hübner, M. (2009). Do tuition fees affect enrollment behavior? Evidence from a ’natural 

experiment’ in Germany (No. 69). University of Mannheim. 

In der Smitten, S., & Jaeger, M. (2012). Ziel- und Leistungsvereinbarungen als Instrument der 

Hochschulfinanzierung. Ausgestaltung und Anwendung. Hannover: HIS GmbH. 

Jaeger, M. (2008). Wie wirksam sind leistungsorientierte Budgetierungsverfahren an deutschen 

Hochschulen? Zeitschrift Für Hochschulentwicklung, 1, 89–104. 

Jaeger, M., & Quast, H. (2010). Studienentscheidung und Studien-gebühren in Baden-

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Kibler, T. (2011). Das Teilzeitstudium. Bedarfsbegründung und Analyse zum Angebot an 
Universitäten und Hochschulen in Deutschland. Hochschule für angewandte 
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Knie, A., & Simon, D. (2010). Stabilität und Wandel des deutschen Wissenschaftssystems. In D. 
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D. Simon, & S. Heise (Eds.), Exzellente Wissenschaft. Das Problem, der Diskurs, das 
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Heine, C. Konegen-Grenier, & A. Schröder (Eds.), Mit dem Bachelor in den Beruf. 
Arbeitsmarktbefähigung und -akzeptanz von Bachelorstudierenden und –absolventen (pp. 
83–113). Essen: Stifterverband für die Deutsche Wissenschaft. 

Konegen-Grenier, C., & Winde, M. (2011). Bildungsinvestitionen der Wirtschaft. Ausgaben der 
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Kultusministerkonferenz. (2001). Sachstand und Problembericht zur Wahrnehmung 

wissenschaftlicher Weiterbildung an den Hochschulen. Beschluss der 
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Vergleich. Gütersloh: CHE Centrum für Hochschulentwicklung GmbH. 

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Universitäten. Eine organisationstheoretisch fundierte empirische Analyse. In U. 
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Wissenschaftsrat. (2012). Private und kirchliche Hochschulen aus Sicht der institutionellen 

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Vergleichende Analyse des Vorgehens in 16 Bundesländern. Gütersloh: CHE Centrum für 
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APPENDIX: LIST OF INTERVIEWED EXPERTS 

Name 
Brigitte Göbbels-Dreyling 

Achim Hopbach 

Christiane Konegen-Grenier 

Matthias Kreysing 

Volker Küch 

Erik Marquardt 

Stefan Niermann 

Frank Ziegele 

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Interviewed 
June 2013 

June 2013 

July 2013 

June 2013 

August 2013 

July 2013 

June 2013 

June 2013 

Position/Affiliation 
Head of Department Financial and 
Legal Affairs, Deputy Secretary 
General 
HRK (German Rectors’ Conference) 
At time of interview: 
Managing Director 
Agency for Quality Assurance and 
Accreditation Austria (AQ Austria) 
Formerly: Managing Director 
German Accreditation Council 
Senior Researcher 
Cologne Institute for Economic 
Research 
Department for Vocational and 
Academic Education 
At time of interview: 
Head of Controlling 
University of Göttingen 
Presently: Vice President 
University of Hildesheim 
Vice President 
Ostfalia University of Applied 
Sciences 
Board member 
German Student Association 
Head of controlling and higher 
education economy 
Lower Saxony Ministry of Science 
and Culture 
Managing Director 
CHE Centre for Higher Education / 
Professor of Higher Education and 
Science Management 
Osnabrück University of Applied 

 
National Report for Germany 

Sciences  

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HUNGARY

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ACKNOWLEDGEMENTS  

The authors would like to acknowledge the support in data research and interpretation provided 
by the following persons:  

  Prof. Tamas Kozma, Center for Higher Education Research and Development, University of 

Debrecen, Hungary 

  Prof. József Temesi, Director, Corvinus University of Budapest, Hungary 
  Zsuzsanna Veroszta Ph.D., Senior researcher, Educatio Nonprofit LLC, Hungary. 

 
 
 
National Report for Hungary 

1.  INTRODUCTION 

1.1  Overview of Higher Education in Hungary 

The Republic of Hungary has a population of around 10 million inhabitants. Currently, there are 
360,000  students  in  Hungarian  higher  education,  around  87%  of  whom  are  studying  at  public 
HEIs. The share of students in public HEIs has remained very stable for the past decade. After a 
period  of  consolidation  in  the  higher  education  institutional  landscape,  Hungary  now  has  26 
universities and 44 colleges  (public and private). The colleges tend to be more specialised and 
smaller than the universities, and whilst both HEI types can offer titles at Bachelor and Master 
level, colleges cannot confer doctoral titles.  

Hungarian  law  recognises  three  categories  of  HEI:  public,  private  and  church-maintained 
(owned), which each have a mixture of universities and colleges, see Table 1.1.  

Table 1.1: HEIs by type and sector  

Universities 
Colleges of higher education87 
Source: Ministry of Human Resources, 2013.  

Public 

Private  

Church-maintained 

19 

10 

2 

12 

5 

22 

All three types of HEI can receive public funding on condition of a successful accreditation of 
their  study  programmes  by  the  Hungarian  Accreditation  Committee  for  Higher  Education 
(established  1993).  Church-maintained  HEIs  are  private  according  to  the  law.  There  are  two 
larger comprehensive church-maintained universities. The smaller colleges tend to specialise in 
theological  and  pastoral-related  study  programmes  (e.g.  social  work).  Private  higher  education 
institutions tend to be colleges and can broadly be characterised as non-profit organisations.88  
According to the European University Association’s autonomy scorecard, Hungarian universities 
have a medium-low level of autonomy (EUA, n.d.-b). Due to the amalgamation of the different 
types and ownerships of HEIs in the current system, this characterisation can broadly be applied 
to  all  HEIs  in  Hungary.  Unlike  many  other  EU  countries  on  the  autonomy  scorecard,  this  low 
assessment  of  institutional  autonomy  is  not  based  on  fiscal  regulations,  which  are  relatively 
loose. It reflects limitations related to organisation, staffing and academic control. The employer 
of the executive head of a university is the minister. Membership of the governing boards (the 
so-called  ‘financial  councils’)  are  controlled  externally.  This  restricts  the  organisational 
autonomy of the HEIs. In terms of staffing, whilst universities can choose their staff freely, the 
contracts  they  have  to  use  are  based  on  regulatory  contracts  for  civil  servants,  which  dictate 

87 In both English and Hungarian sources these are variously titled university colleges, universities of applied 
science and colleges of higher education. In the following text, these will simply be termed colleges. 
88 For examples: the Kodolányi János Főiskola with 10,000 students: 
http://www.kodolanyi.hu/en/university_college/mission (14.02.2014) 

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wages  and the  rules  for  employment  termination.  Academic  restriction  pertains to  the  fact that 
new  study  programmes  have  to be  accredited beforehand  and accreditation  regulations and  the 
accrediting  body  is  set  and  financed  by  the  central  authority.  Furthermore,  the  entrance 
requirements  for  more  than  half  of  all  students  (i.e.  those  on  state-funded  places)  are  set  and 
administered by a central authority and not the HEI in question.  

Most Hungarian students now follow a Bologna-type programme at Bachelor, Master or doctoral 
level.  These  entered  into  law  in  2004  and  were  implemented  at  institutional  level  from  2005. 
Before this, universities and colleges were part of a binary system and university degrees took 
four  to  five  years,  whilst  college  degrees  took  three  to  four  years.  Some  long  duration  (one-
cycle)  programmes  still  exist.  They  end  in a Master  qualification and tend  to be  in the  subject 
fields of medicine, engineering and law.89  

1.2  Key Higher Education Stakeholders 

The  regulations  and  procedures  for  higher  education  are  set  by  the  State  Secretary  for  Higher 
Education, who, since 2010, has been affiliated to the Ministry of Human Resources, which also 
incorporates the portfolios for public education, health, social welfare, culture and sports. 

In  the  case  of  the  determination  of  specific  reforms  to  higher  education,  the  initiative  often 
comes  ultimately  from  the  prime  minister  (on  recommendation  of  the  Minister  of  State  for 
Human  Resources),  including  the  determination  of  the  public  funding  of  higher  education  and 
the number of state-funded study places.  

The  Hungarian  Accreditation  Committee  for  Higher  Education  (Magyar  Felsőoktatási 
Akkreditációs Bizottság – MAB) was set up in 1993. It is an independent body of experts with 
national competence set up to evaluate the quality of study programmes, academic research and 
creative  activities  of  higher  education  institutions  and  to  assess  the  operation  of  institutional 
quality improvement systems.  

The Higher Education and Research Planning Board (Felsőoktatási Tervezési Testület – FTT) is 
an  independent  advisory  body  of  experts,  who  express  opinions  and  make  proposals  on  issues 
relating to funding and development activities of higher education.  

The application procedure to HEIs is administered centrally by the Higher Education Authority 
(Oktatási  Hivatal),  with Educatio  Nonprofit  LLC  (Educatio  Társadalmi Szolgáltató Nonprofit) 
coordinating and executing the admission procedure.  

Student  fees  are  a  major  issue  for  Hungarian  higher  education,  therefore,  the  Office  of  the 
Commissioner  for  Educational  Rights  (Oktatási  jogok  biztosa)  is  often  required  to  act  as  an 
ombudsman  in  cases  in  which  applicant  students  feel  that  they  have  been  unfairly  treated  in 
respect of entrance to higher education and/or the award of state-funded study places. 

89 Since 2013, this list also includes teacher-training. 

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The higher education institutions are represented on a national level by the Hungarian Rectors’ 
Conference (MRK), which advocates the interests of their member institutions. It is expected to 
act as a consultative organization on issues related to governance and development of the higher 
education sector.  

The  National  Conference  of  Students'  Self-Governing  Bodies  (HÖOK)  and  the  National 
Association of PhD Students represent students at national level and make proposals on higher 
education issues concerning their members. 

The Student Loan Centre (Diákhitel) provides student loans to applicant students at a preferential 
rate.  It  is  a non-profit bank,  which  itself  is  funded inter  alia  through  a European Central Bank 
loan.  

1.3  How Governments Fund Institutions 

Public funding of HEIs today is a formula based funding. It has three main components: funding 
of instruction, research support and covering the maintenance costs. The first component mainly 
depends on the number of students (about 70% of the state support). The second one is based on 
the number of qualified teachers and PhD students (10-30%). The third one is based on historical 
data  (about  10%).  Investment  decisions  are  made  on  governmental  level.90  In  addition  to  the 
regular state support for HEIs there are competitive state funds for research projects.  

The  mechanism  to  distribute  the  majority  of  the  state  support  has  been  based  on  the  so-called 
state-funded  places  since  1997.  Students  obtaining  state-funded  places,  based  on  their  school 
grades,  are  able  to  study  for  free.  The  state  funding  is  paid  from  the  state  budget  to  the  HEI 
through the Treasury in lieu of the tuition fees students otherwise pay. Before 1997, state grant 
allocations were based on historical data and the amounts were negotiable. 

Since the early 2000s, around half of all students (see Figure 2.4) receive a state-funded place. 
The funding was based – at the time – on the standard costs for such study programmes, but due 
to the lack of any kind of adjustment it has lost its relation to the actual costs. As it was described 
earlier,  the  standard  costs  are  divided  into  cost  categories  (operating  expenses  for  instruction, 
research, management and specific tasks). The number of state-funded places in a particular field 
of  study  and  the  minimum  score  for  an  applicant  to  obtain  a  state-funded  study  place  is 
determined  by  the  ministry  annually  and  places  are  allocated  to  the  HEIs  individually. 
Universities and colleges may enrol a higher number of students, but these must cover their own 
costs through self-financed tuition fees. These fees are set autonomously by each HEI, subject to 
the ceilings set by law. However, according to the interviewees, institutions tend to keep fees low 
due to high levels of competition. 

Until 2010 private HEIs made contracts with the state to get state-funded places (the amount was 
equal to the amount given to state-owned institutions). Church-maintained institutions have got 

90 A new system is planned to be introduced from 2014: all three components will depend on the number of students 
(per capita funding). It has not been approved by parliament yet. 

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maintenance  support, too,  based  on an  agreement  with  the  Vatican.  Since  2010  the  number  of 
state-supported  places  for  private  institutions  are  minimal,  close  to  zero.  Out  of  those  students 
studying on state-funded places, the best students receive additional state scholarships to cover 
general living costs. That money also goes to the budget of the HEI, however, this is a formality 
only, because it must be passed on directly to the students. 

A  smaller  amount  of  funding  is  available  to  universities  based  on  research  applications. 
However, according to the Higher Education Act from 2005 this amount may not exceed 5% of 
the total amount allocated on the basis of teaching costs in the main budget.  

Project  funding  (especially  from  the  European  Union)  is  becoming  increasingly  attractive  for 
HEIs, which see them as a further way to cover, in particular, the costs of incumbent staff.  

In the Higher Education Act from 2005, the state introduced an instrument to make the public 
funding  of  HEIs  more  transparent.  Public  HEIs  have  to  negotiate  a  three-year  maintenance 
agreement with the ministry. The maintenance agreement  – in other jurisdictions often called a 
performance  agreement91  –  determined  the  performance  requirements  for  the  HEI  over  the 
subsequent  three-year  period,  the  fixed  components  as  well  as  the  amounts  for  the  variable 
components  of  state  funding  (determined  by  performance  indicators).  The  hope  was  that  this 
system  would  also  provide  a  certain  amount  of  financial  security  for  the  HEIs.  However,  the 
economic crisis in 2008 resulted in a mid-term reduction in the state funding for HEIs and the 
agreement system was abolished in 2010. 

One  of  the  most  recent  developments  has  been  the  attempt  of  the  state  to  calculate  future 
demands of the economy and the labour market and specifically target the state-funded student 
places to these fields. Since 2011 the number of state-funded places has declined significantly and it 
is  expected  that  this  number  will  continue  to  decline  over  the  coming  years.92  An  increasing 
differentiation  by  subject  field  is  evident  due  to  the  efforts  of  the  government  to  only  fund  study 
places with a clear future impact. In 2012 there were practically no state-funded places in the fields 
of  humanities,  art,  law  and  business,  whilst  there  was  a  slight  increase  for  the  subjects  science, 
engineering, informatics and medical studies. 

1.4  History of Cost-Sharing 

Tuition fee policy 

Tuition  fees  appeared  in  Hungarian  higher  education  in  1996  and  soon  became  a  significant 
source of funding for HEIs. Despite a large share of the student population being on state-funded 
places  from  the  early  2000s,  HEIs  often  required  these  students  to  pay  additional  charges. 
Indeed,  in  2007  the  incumbent  government  tried  to  introduce  so-called  annual  student 
improvement  contributions  to  be  paid  by  all  students  as  part  of  its  deficit  cutting  reform  package. 

91 See reports for Finland and Austria. 
92 This may, in turn, increase the number of fee-payer places again, which has been decreasing over the past five 
years – see Figure 2.4 below. 

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However, a nationwide referendum in March 2008 rejected the package and Parliament voted to ban 
such  additional  fees  in  agreement  with  the  outcome  of  the  referendum,  thus  making  state-funded 
places totally free to the student. 

Tuition fees for those students not obtaining state-funded places and for non-EU students, who 
are  ineligible  for  state-funded  places,  may  be  set  autonomously  be  HEIs  and  usually  vary  by 
individual institution, subject area and qualification level. Current information for the academic 
year 2013/14 shows that the fees tend to range between 600 euros and 1,200 euros per semester, 
although there are outliers, which are much higher or lower.93  

Study aid policy  

Students in Hungarian higher education have access to grants and loans. Only students on state-
funded study places, i.e. students who do not pay tuition fees, are eligible for study grants (state 
scholarships)  which  aim  to  help  those  students  to  cover  their  living  costs.  The  grants  go  as  a 
lump sum to the HEIs based on a list of eligible students by set criteria (e.g. merit, but also to a 
lesser  extent,  orphans, disabled  students,  students  from  certain backgrounds  etc.) and the  HEIs 
decide  on  the  allocation  within  the  HEIs.  Often  the  student  councils  are  involved  in  these 
decisions.  

The  usual  amount  in  2011  was  230  euros  per  annum  (assumption  of  cover  for  10  months  of 
study), but a needs-based assessment could lead to an increase to 450 euros  per year (Eurydice, 
2013).  A  controversial  new  law  from  2012  required  recipients  of  this  grant  to  sign  a  contract 
which stipulates that it will only remain a grant if the recipient stays in Hungary after graduation 
for twice the duration of his/her studies.  The government changed the rule in 2013, and now the 
duration is the same as the supported period, and there are several exemptions. 

All  students  have  additionally  had  the  possibility  of  taking  out  a  government  guaranteed  loan 
from the Student Loan Centre (Diákhitel) since 2001 (Havelda, 2010). It was a small amount for 
living expenses until 2010. From 2010 a new scheme was established (Student Loan 2) where the 
students  could  apply  for  funding  to  cover  the  tuition  fee.  The  loan  is  offered  at  a  preferential 
interest  rate,  which  covers  government  costs  of  borrowing  and  operating  the  system.  Payment 
starts after graduation from university or college irrespective of the employment of the graduate, 
but deferment  is possible.  Recent  figures  from  the  Student  Loan  Centre  (Havelda,  2010)  show 
that the loan can make up around one third of a recipient student’s income. Despite this, take-up 
is low and has remained relatively stable since the loan’s introduction at around one quarter of 
the student population. 

Policies designed to increase private investment in higher education 

The  New  Hungary  Development  Plan  from  2007,  which  is  funded  through  a  European  grant, 
promotes the role of higher education in innovation and supports cooperation between HEIs and 
business  (National  Development  Agency,  2007).  Besides  this  direct  support,  the  Higher 

93 See information from the admissions service on: http://www.felvi.hu/felveteli/egyetemek_foiskolak (13.02.2014) 

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Education Act of 2005 further facilitated the possibilities of public HEIs to establish cooperation 
and  joint  ventures  with  business.  The  Innovation  Fund  allowed  companies  to  transfer  money 
designated  to  innovation  to  universities  as  a  tax  benefit.  For  instance,  the  Széchenyi  István 
University  in  Győr  and  Audi  work  closely  together  supported by  the  government’s  Innovation 
Fund,  which  allows  Audi  to  invest  a  portion  of  its  business  tax  into  university  research  and 
development. This has led to the creation of the Audi research centre. However, overall income 
from enterprises and entrepreneurial activities remains modest on system level, see Section 2.1 
(particularly Figure 2.3 and Table 2.1). 

1.5  History of Enrolment 

Regulation of enrolment 

The  requirement  for  admission  to  Bachelor  and  undivided  one-cycle  Master  courses  is  the 
secondary school leaving examination taken – as a rule – after the completion of the 12th grade 
of a secondary school, certified by Érettségi bizonyítvány (secondary school leaving certificate). 
The number of state-funded places for each study level and study field is annually determined by 
the government. HEIs are free to enrol further students, but these are then on fee-paying places. 
An  applicants’  ranking,  and  therefore,  their  chance  of  getting  a  state-funded  place  in  a  certain 
field  of  study  at  a  certain  HEI,  is  based  on  their  secondary  school  grades  and  their  secondary 
school leaving examination results (érettségi vizsga) or, in some cases, based solely on the latter. 
Previous to this system, HEIs used their own entrance examinations, but these were abolished in 
2005.  

The number of school-leavers qualifying to enter higher education stayed relatively stable in the 
period 1995 until 2011 at around 90,000, as shown in Figure 1.1. However, the data also show 
the year 2004 with a peak in secondary school graduates and, following a large drop in 2008, a 
continuing decline into 2011.  

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Figure 1.1: Total number of secondary school graduates (1995-2011) 

Source: Statistical Yearbook, various years. 

The  number  of  entrants  to  higher  education  highlights  that  at  the  start  of  the  2000s  almost  all 
school-leavers were entering higher education, while the number started to drop off from 2005, 
see  Figure  1.2.  The  data  also  shows  that  the  number  of  public  university  entrants  stayed 
relatively stable until 2006 and then began to increase, whilst the college public sector has been 
losing entrants relatively speaking since 2004. 

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010,00020,00030,00040,00050,00060,00070,00080,00090,00019951996199719981999200020012002200320042005200620072008200920102011 
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Figure 1.2: Total number of entrants to higher education, by type of HEI (2001-
2011) 

Note: Admitted students on undergraduate courses in a 'normal' admission process (BA/BSc, traditional university 
or college, one-cycle courses), new entrants= first degree. 
Source: Higher education application and admission data – Educational Authority. 

Figure 1.3 reflects the same trend for all students in the system. It can be seen that it is actually 
the public college sector, which has decreased in size since the high in 2004 and 2005.  Indeed 
the size of the sector has depleted by 52% or 62,000 students since 2005. The size of the private 
sector has decreased also by 35% or 7,000 students.  

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010,00020,00030,00040,00050,00060,00070,00080,00090,000100,00020012002200320042005200620072008200920102011Public universitiesPublic collegesPrivate collegesChurch-maintained universitiesChurch-maintained collegesAll HEIs 
 
National Report for Hungary 

Figure 1.3: Total number of students at all HE levels in universities and colleges 
(2001-2011)  

Source: Higher education application and admission data – Educational Authority. 

Despite  a  net  loss  in  the  number  of  students  of  around  65,000  or  64%  since  2005,  the 
participation rate has actually increased. Figure 1.4 shows an increasing participation rate from 
24%  in  2001  to  32%  in  2011.  However,  it  also  shows  that  this  increase  is  directly  related  to 
demographic changes The number of people in the Hungarian population who could have been 
studying  (within  the  best-four-years  for  student  participation)  has  decreased  by  20%  in  the 
decade between 2001 and 2011.  

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050,000100,000150,000200,000250,000300,000350,000400,000450,00020012002200320042005200620072008200920102011public universitypublic collegechurch-maintained universitychurch-maintained collegeprivate universityprivate college 
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Figure 1.4: Enrolment rate for best-four-years (2001-2011)  

Note:  Best-four-years  were  19-22  years  old  for  2002-2007;  20-23  years  old  for  2001,  2008-2011.  The  best  four 
years account for about 45% of all students. 
Source: Statistical Yearbooks of Hungary, 2001-2011 / own calculation.  

The  central  statistics  for  applicants  to  final  number  of  entrants  in  Figure  1.5  shows  that  this 
change,  which  can  be  formulated  as  a  weaker  demand  for  study  places,  has  led  to  a  lower 
number of applicants in the system and consequently a higher share of acceptances. In 2001 only 
63% of applicants found a study place, whereas in 2011 this share has risen to 70% and indeed 
reached  a  high-point  in  2008  at  83%  (at  the  time  of  the  start  of  the  financial  crisis).  A 
differentiation  between  public  HEI  types  shows  that  universities  were  more  selective  than 
colleges on this measure at the start of the 2000s, but have been less selective than the colleges 
(which now have less study places on offer) since 2008. The ratio of applicants to study places 
also varies by field of study, which will be looked at below in Section 5.3. 

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0%5%10%15%20%25%30%35%40%0100,000200,000300,000400,000500,000600,000700,00020012002200320042005200620072008200920102011StudentsPopulationParticipation rate (right axis) 
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Figure 1.5: Total number of applicants and share entrants-to-applicants for all 
HEIs (2001-2011) 

Source: Higher education application and admission data – Educational Authority. 

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63%67%64%63%66%70%74%83%72%68%70%020,00040,00060,00080,000100,000120,000140,000160,0000%10%20%30%40%50%60%70%80%90%20012002200320042005200620072008200920102011Share entrants-to-applicants (left axis)All applicants (right axis) 
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Figure 1.6: Share entrants-to-applicants by type of HEI (2001-2011) 

Source: Higher education application and admission data – Educational Authority. 

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59%61%61%58%62%66%72%81%71%69%69%66%75%65%68%72%76%71%80%67%64%63%0%10%20%30%40%50%60%70%80%90%20012002200320042005200620072008200920102011UniversitiesColleges 
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2.  HYPOTHESIS A: AS PRIVATE FUNDING INCREASES, 

INSTITUTIONAL REVENUE INCREASES 

This  chapter  looks  at  data  relevant  to  Hypothesis  A,  which  states  that  as  private  funding 
increases,  institutional  revenue  increases,  but  only  if  public  funding  remains  constant.  That 
means that it will examine whether: 

 
 
 

there has been an increase in private funding 
there has been a concurrent change to public funding 
there has been a total increase in funding and how this is related to changes in private and 
public revenues. 

Changes  in institutional  funding  will  be  considered  both  in  terms  of  total  institutional  revenue 
and relative to the number of students.  

2.1  Changes in Institutional Revenues over Time 

Figure  2.1  shows  that  total  public  funding  on  HEIs  grew  strongly  at  an  average  of  18%  until 
2004 and then continued to grow at a lower level around 6% until it stagnated in 2009, following 
the  financial  crisis.  This  means  that the  introduction  of  tuition  fees  in  1996 did not  result  in  a 
decline in public investment, but complemented it.  

With reference to the economic ability of the country, it can be seen that Hungary has tended to 
invest around 1% of GDP in higher education. The financial crisis of 2008, which caused a drop 
in  the  GDP,  is  clearly  visible  in  the  difference  between  constant  investment  by  GDP,  but 
absolute financial drop in investment. 

The decline in the total number of students has meant that public funding per student has in fact 
increased since 2001, see Figure 2.2. 

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Figure 2.1: Public expenditure on HEIs in million HUF94 and as a percentage of 
GDP 

Note: Constant Prices (2011). 
Source: Statistical Yearbook of Education, 2001-2011. 

94  One euro equals 312 Hungarian forint (HUF), as of March 2014. 

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0.0%0.2%0.4%0.6%0.8%1.0%1.2%050,000100,000150,000200,000250,000300,0001995199619971998199920002001200220032004200520062007200820092010Public expenditure on HEIs (left axis)Public expenditure on HEIs, % of GDP (right axis)                                                 
National Report for Hungary 

Figure 2.2: Public expenditure per student, in HUF (2001-2010)

Note: Constant prices (2011). 
Source: Statistical Yearbook of Education, 2001-2011. 

There  is  little  detailed  administrative  data  on  the  income  of  HEIs  in  Hungary,  and  the  most 
reliable  source  appears  to  be  the  data  prepared  for  the  international  UOE  dataset,  which  only 
includes data for Hungary until 2006. This is presented in Figure 2.3. It highlights the importance 
of public funding, even in this dual-track tuition fee system. 

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0100,000200,000300,000400,000500,000600,000700,000800,0002001200220032004200520062007200820092010 
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Figure 2.3: Income of all HEIs in public and private sectors differentiated by 
public and private revenues in million HUF (2000-2010) 

Note:  No  data  available after  2006, other  than  for  public  expenditures. Only  direct transfers  to HEIs. Constant 
Prices  (2011).  The  total  fee  income  appears  to  be  underestimated,  since  it  reflects  the  total  income  given  for 
public HEIs in Table 2.1.. 
Source: UOE dataset, 2013.  

A special analysis by the Hungarian Audit Office in 2009 provided a more detailed breakdown 
of income data for public HEIs in the  years 2005 and 2008. These are shown in Table 2.1. At 
least  for  these  two  years  the  composition  of  income  remained  relatively  stable,  with  around 
three-quarters of the public HEIs’ income coming from public sources and half of this from the 
state-funded  study  places  (normative  financing).  Fee  revenue  made  up  9%  of  income,  and 
entrepreneurial income (through services) no more than 1% in the public sector. 

The  interviews  carried  out  with  university  leaders  and  experts  on  higher  education  funding 
confirm  that  this  picture  has  not  changed  much  since  2008.  Experts  see  in  general  that  state-
funded study places (normative financing) make up around 50% to 60% of a public university’s 
total income, and an interviewed university leader confirmed that public funding has remained 
near to 75% of total income over the past years.  

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050,000100,000150,000200,000250,00020002001200220032004200520062007200820092010public expendituresfeesother privateall expenditures 
 
 
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Table 2.1: Composition of income of public HEIs 

Total income 
Public funding 
a) normative financing 

b) grants awarded by tender 
c) based on agreement 
(discretionary) 
Private revenues 
a) fee-revenue 

2005 
million HUF 
241,704 
177,400 
117,253 

20,707 

9,911 
64,304 
21,842 

2008 
million HUF 
339,198 
251,571 
174,790 

22,856 

17,962 
87,627 
31,869 

% 

73% 
49% 

9% 

4% 
27% 
9% 

% 

74% 
52% 

7% 

5% 
26% 
9% 

b) entrepreneurial activities 
c) rental 
Note: In both the case of public and private funding, only the major categories are further differentiated (i.e. a+b+c 
does not equal the sum). Constant prices (2011). 
Source: State Audit Office of Hungary in 2009, cited in Mészáros (2012, p. 281) / own calculation. 

3,779 
3,177 

2,256 
1,754 

1% 
1% 

1% 
1% 

The  income  from  tuition  fees  is  based  on  the  share  of  students  on  fee-paying  places,  which  is 
influenced by both the field of study and the mode of study (full or part-time). Figure 2.4 below 
shows that the share of fee-paying places has decreased over the period observed, from 45% in 
2001, rising to 50% in 2003 and 2004 and then dropping to 42% in 2011.  

The share of fee-paying students on full-time courses in 2001 was 17%, but rose to 27% in 2011. 
In  the  same  period,  the  share  of  part-time  students  on  fee-paying  places  dropped  from  85% to 
73%. It should be noted that part-time students do not – in general – pay lower fees per semester 
than  full-time  students;  they  simply  have  a  different  enrolment  status.  On  the  basis  of  this 
information,  a  decline  in  the  number  of  part-time  students  has  a  substantial  impact  on  the 
chances of a HEI earning additional private revenues via fees.  

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Figure 2.4: Share of students on fee-paying places by mode, all HEIs (2001-
2011) 

Source: Higher Education Statistical Data Collection System - Ministry of Human Resources. 

Figure 2.4 shows an overall drop in the number of part-time students, and Figures 2.5 and 2.6 
show that the colleges were especially affected by this and were, in contrast to the universities, 
not able to increase the share of full-time fee-paying places in the same period.  

Additionally,  since  both  revenue  via  fees  and  state  funding  via  state-funded  places  inject 
volatility into HEI revenues when student numbers are not kept stable, it can be expected that the 
colleges have been struggling to keep their expenditure under control since at least 2006.  

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45%48%50%50%49%47%47%44%42%42%42%14%16%18%20%20%21%24%24%24%26%27%83%85%85%85%84%82%82%80%76%74%73%0%10%20%30%40%50%60%70%80%90%20012002200320042005200620072008200920102011share of all studentsshare of full-time studentsshare of part-time students 
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Figure 2.5: Share and number of entrants on fee-paying places by mode in 
public universities (2001-2011) 

Source: Higher Education Statistical Data Collection System - Ministry of Human Resources.  

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010,00020,00030,00040,00050,00060,00070,00080,00090,000100,0000%10%20%30%40%50%60%70%80%90%100%20012002200320042005200620072008200920102011share of full-time students (left axis)share of part-time students (left axis)number of full-time students (right axis)number of part-time students (right axis) 
National Report for Hungary 

Figure 2.6: Share and number of entrants on fee-paying places by mode in public 
colleges (2001-2011) 

Source: Higher Education Statistical Data Collection System - Ministry of Human Resources. 

2.2  Institutional Expenditures 

The data in Figure 2.7 and 2.8 show the total and staff expenditure for public HEIs, differentiated 
between  universities  and  colleges.  The  data  show  a  flattening  in  total  public  expenditure  from 
2008  and  a  decline  in  the  public  spending  received  to  cover  staff  costs.  This  issue  was  raised 
often  in the  Hungarian interviews,  where  HEI  leaders  spoke  of  the  challenge  of  covering  staff 
costs. For instance, it was stressed how important it has become for staff to win grant tenders in 
order to cover their own staff costs. Indeed the expert stated that around 25-33% of staff costs are 
covered in this way.  

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010,00020,00030,00040,00050,00060,0000%10%20%30%40%50%60%70%80%90%20012002200320042005200620072008200920102011share of full-time students (left axis)share of part-time students (left axis)number of full-time students (right axis)number of part-time students (right axis)National Report for Hungary 

Figure 2.7: Expenditure by public universities in million HUF (2005-2009) 

Note: Constant prices (2011). 
Source: Statistical Yearbooks, 2006-2010. Most recent data available. 

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60,80061,30070,00076,70073,800100,200105,500123,400136,900141,600020,00040,00060,00080,000100,000120,000140,000160,00020052006200720082009Staff costsTotal public expenditure 
 
National Report for Hungary 

Figure 2.8: Expenditure by public colleges in million HUF (2005-2009)  

Note: Constant prices (2011). 
Source: Statistical Yearbooks, 2006-2010. Most recent data available. 

Despite  the  constraints  on  the  public  budget,  the  student  to  staff  ratio  has  been  able  to  remain 
relatively stable in the public university sector (see Figure 2.9). The increased enrolments in the 
early 2000s visibly affected the index in the college sector, but it has returned to the ratio at the 
start of the decade.  

At  the  same  time,  there  seems  to  be  a  convergence  of  lines  for  universities  –  at  around  20 
students  per  academic  staff  –  and  colleges  –  at  around  30  students  per  academic  staff.  It  is 
particularly  remarkable  to  see  the  convergence  rate  of  colleges  from  the  private  sector,  which 
now have similar ratios to the public colleges. This would suggest that these colleges have been 
holding on to staff despite the declining student numbers. This is likely related to the obligation 
to  for  all  HEIs  to  have  their  courses  accredited,  which  means  that  certain  quality  norms  are 
applied. Additionally, in a number of the interviews HEIs leaders talked about an expected future 
growth  in  student  numbers,  which  may  also  account  for  them  retaining  these  staffing  levels, 
although it is proving a challenge at the present.  

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29,70033,40038,50042,10040,60042,50055,70064,90072,60072,900010,00020,00030,00040,00050,00060,00070,00080,00020052006200720082009Staff costsTotal public expenditureNational Report for Hungary 

Figure 2.9: Students per (full-time equivalent) academic staff by HEI type and 
sector (2001-2011) 

Source: Higher Education Statistical Data Collection System - Ministry of Human Resources. 

2.3  Evaluation 

The  main  question  raised  under  Hypothesis  A  is  whether  cost-sharing  has  led  to  increased 
revenues for HEIs or whether those new revenues have simply compensated for missing public 
investment.  

It  is  remarkable  that public investment  grew  steadily  throughout the 2000s  and broadly  in-line 
with  economic  growth  in  Hungary.  Indeed,  there  was  a  continual  and  relatively  stable  public 
investment in HEIs throughout the period observed until 2008, when the global financial crisis 
affected funding. Even in this period, the funding as share of GDP remained the same, but the 
drop in GDP led to a drop in absolute public funding.  

In  order  to  evaluate  this  development,  it  is  important  to  understand  how  public  spending  is 
allocated  and  how  private  income  is  earned  by  HEIs.  Public  funding  is  generally  provided 
through the state-determined number of state-funded study places per subject area and HEI and 
private revenue through the number of fee-paying places, which is autonomously determined by 
the HEIs. Tuition fees from fee-paying students are therefore an integral part of HEI funding. It 

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0102030405060708020012002200320042005200620072008200920102011Public universitiesPublic collegesChurch-maintained universitiesChurch-maintained collegesPrivate colleges 
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does  seem  that  fee-revenue  enabled  the  higher  education  sector  to  deal  with  the  growth  in  the 
enrolment early 2000s, as the share of students on fee-paying places increased in this period.  

This so-called dual-track system enabled public universities, particularly, to take a steady course 
through this period. Income share from the public purse remained at around 75% for HEIs, with 
fee-paying students a stable source of private revenue.  

On an institutional level, both revenue via fees and state funding via state-funded places inject 
volatility  into  HEI  revenues  when  student  numbers  are  not  kept  stable.  Therefore,  the  overall 
drop in the number of students and the share of students on part-time places (for which there are 
few state-funded places, see Section 1.6) will have affected the revenue of individual HEIs, and 
as shown in the analysis, particularly colleges will have been struggling to keep their expenditure 
under control since at least 2006. 

At the same time, the number and share of full-time students who are paying fees has increased 
throughout the 2000s, which may signify efforts of universities and colleges to increase their fee 
revenues. In the limited comparison of income revenues presented above, fee revenues have also 
increased by two-thirds between 2005 and 2008 (although the total contribution to HEI income 
remained  broadly  unchanged).  In  sum,  fee  income  appears  to  provide  an  important  revenue 
source  for  HEIs,  which  has  become  an  integrated  component  of  the  total  higher  education 
funding system.  

Fees are necessary, inter alia, to cover staff costs. Overall, the student-to-staff ratio has remained 
stable throughout the period observed. This is not the case for colleges, where it has significantly 
improved. However, this improvement is likely related to both the efforts to set threshold quality 
standards, but also to the large drop in enrolment in this sector.  

Despite this, the interviews with HEI leaders highlighted the struggle to cover staff costs in many 
HEIs. For this reason, some HEIs require staff to obtain project-based funding from competitive 
tenders (often from the EU) to help cover their own costs.  

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3.  HYPOTHESIS B: AS THE INCENTIVES TO EARN 

PRIVATE FUNDING INCREASE, INSTITUTIONS BECOME 
MORE RESPONSIVE TO USER DEMAND 

This  chapter  looks  at  data  relevant  to  Hypothesis  B,  which  states  that  as  incentives  to  earn 
private  funding  increase,  institutions  become  more  responsive  to  user  demand.  However,  this 
expected  effect  is  conditional  on  the  attractiveness  of  these  private  revenues  and  whether 
increasing these revenues has trade-off effects for the overall behaviour or prestige of HEIs.  

Various aspects of responsiveness will be examined, including changes to provision, enrolment 
and the connection between HEIs and users. If  no changes to responsiveness are visible, this is 
likely  related  to  the  incentive  structure  present  in  the  higher  education  system,  which  might 
favour other behaviours such as the maximisation of public over private funding. 

3.1  Enrolment by Discipline 

Between 2001 and 2011, the share of new entrants studying various disciplines has changed, as 
shown in Figure 3.1.  

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Figure 3.1: New entrants by field of study, all HEIs – all fields of study (2001-
2011) 

Source: Higher education application and admission data – Educational Authority. 

These  developments  are  highlighted in  Figure  3.2  for  selected  fields  of  study.  The  thicker  line 
shows the general trend in the absolute number of new entrants, which showed a decline between 
2005  and  2007  followed  by  a  moderate  increase.  This  trend  was  not  followed  by  all  fields  of 
studies.  The  most  dramatic  decline  (although  from  a  relatively  high  level)  is  for  the  field  of 
economics and  social  sciences,  which  already  began  in 2001 and  stabilised  in 2007.  The  same 
trend was followed by the field of humanities, although it was not so dramatic. In contrast, the 
number of new entrants in the field of engineering, medical and health care and natural sciences 
remained very stable throughout the whole period.  

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0%10%20%30%40%50%60%70%80%90%100%20012002200320042005200620072008200920102011AgricultureHumanitiesEconomics and Social SciencesInformaticsLaw (and administration)EngineeringArtsMedical and healthcareTeacher trainingSportsNatural sciencesHE vocational 
National Report for Hungary 

Figure 3.2: New entrants by field of study, all HEIs– development in selected 
fields of study (2001-2011) 

Source: Higher education application and admission data – Educational Authority. 

These developments are likely to be most heavily influenced by the ratio of fee-paying places to 
state-funded places. In the former case, supply and demand is likely to determine the number of 
places, whilst in the latter case it is the state which determines the number of entrants. In fact, the 
largest  fluctuations  in  the  number  of  new  entrants  by  field  of  study  are  evident  in  the  private 
HEIs, which are (almost exclusively) colleges.  

Figure 3.3 shows, in turn, that the dramatic drop in the number of new entrants to private HEIs is 
tied to a decrease in the number of economics and social science students and, to a lesser extent, 
to the number of students of informatics. New developments since the mid-2000s are to be seen 
in the field of vocationally-orientated higher education. 

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010,00020,00030,00040,00050,00060,00070,00080,00090,000100,00005,00010,00015,00020,00025,00030,00035,00020012002200320042005200620072008200920102011HumanitiesEconomics and Social SciencesInformaticsEngineeringMedical and healthcareTeacher trainingNatural sciencestotal (right axis) 
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Figure 3.3: New entrants by field of study, private colleges (2001-2011) 

Source: Higher education application and admission data – Educational Authority. 

3.2  Enrolment Patterns by Mode 

The  changes  in  the  mode  of  study  have  already  been  alluded  to  in  the  previous  sections. 
However, in Figures 3.4 and 3.5 these changes are also differentiated by qualification level, since 
there are likely, for instance, to be more part-time students on a graduate course (e.g. Masters). 
Figure 3.4 shows that the rise in number of students culminating in the peak for the years 2004 
and  2005  was  very  much  fuelled  by  increases  in  the  number  of  part-time  students  in  both 
university and college sectors (public and private). Indeed, whilst the total number of students in 
2011 has returned to a level similar to the starting point one decade earlier in 2001, the overall 
share  of  full-time  students  has  risen.  This  is  likely  to  be  related  to  the  rise  in  the  provision  of 
state-funded study places, which are predominantly full-time places (see Figure 2.5 above). 

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02,0004,0006,0008,00010,00012,00014,00001,0002,0003,0004,0005,0006,0007,0008,00020012002200320042005200620072008200920102011HumanitiesEconomics/Social SciencesInformaticsHE vocationalTotal (right axis) 
National Report for Hungary 

The  development  for  graduate  studies  shown  in  Figure  3.5  shows  that  these  courses  are  most 
often offered as full-time courses in universities. Again, this is clearly related to the provision of 
state-funded full-time places, which provide a secure funding source for the universities. 

Figure 3.4: Total number of Bachelor students with full-time and part-time 
status in universities and colleges (2001-2011)  

Source: Statistics Hungary. 

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050,000100,000150,000200,000250,000300,000350,000400,000450,00020012002200320042005200620072008200920102011University full-time BAUniversity part-time BACollege full-time BACollege part-time BA 
 
National Report for Hungary 

Figure 3.5: Total number of Master and Ph.D. students with full-time and part-
time status in universities and colleges (2001-2011) 

Source: Statistics Hungary. 

3.3  Enrolment Composition 

Figure  3.6  shows  the  number  of  international  students  at  Hungarian  HEIs.  While  the  absolute 
number  of  non-citizen  students  has  almost  tripled  between  1998  and  2011,  the  share  of 
international students has remained very low, increasing from about 3% in 1998 to about 5% in 
2011. 

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Figure 3.6: Number of international students at Hungarian HEIs (1998-2011) 

Note: International students are defined as students without Hungarian citizenship. 
Source: OECD. 

Given that Hungary has a dual track system where home students who do not obtain state-funded 
places can be charged tuition fees which are set autonomously by the HEI, there is no particular 
incentive for HEIs to attract international students for reasons related to cost-sharing. 

3.4  Diversity of Provision 

Changes in the number of HEIs 

Viewing  the  total  higher  education  sector,  Figure  3.7  shows  that  the  number  of  colleges  has 
declined  over  time  from  43  to  42,  with  a  high  in  2005  of  47.  The  number  of  universities  has 
grown from 22 to 27 in the same period. 

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Figure 3.7: Number of HEIs, universities and colleges (2000-2011) 

Source: Statistics Hungary. 

In  combination  with  enrolment  statistics,  it  is possible  to  calculate  the  average  size  of  each  of 
these HEIs at any time and to differentiate between the public and the private sector, see Figure 
3.8.  It  clearly  shows  a  decline  in  the  average  number  of  enrolled  students  for  all  HEI  types  in 
both  the  private  and  public  sector  of  the  higher  education  system  after  a  high  in  2002  for  the 
private colleges and in 2004 or 2005 in the public sector. 

In the private sector, the number of colleges has grown marginally between 2001 and 2011 from 
9  to  12,  with a  high  in  2008 and  2009  of  13.  In  the  public  sector,  the  number  of  colleges  has 
declined more substantially from 13 to 10. These changes have led to changes in the average size 
of HEIs (Figure 3.8).  

Whilst the number of private universities has grown to two, Figure 3.8 shows that these are still 
of  a  very  small  size  indeed  (around  200  students  in  total).  Similarly  the  size  of  the  private 
colleges is much smaller than in the public sector. In 2010 these colleges had on average 2,700 
students, but more importantly there has been a decline in the average size from 3,300 to 2,100 
students  (-36%).  This  reflects  how  institutions  have  been  coping  with  the  total  decline  in 
enrolments in the private sector.  

The  public  universities  have  remained  roughly  the  same  size  at  13,700.  The  colleges  have 
declined in size in the public sector by around 11%. 

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Figure 3.8: Average size of universities and colleges by sector (2000-2011) 

Source: Statistics Hungary / own calculations. 

3.5  Outreach Practices 

Marketing budgets 

The interviews have shown that HEIs do use marketing to recruit students. There are both private 
and public HEIs which have marketing directors and explicit policies. One college representative 
reported  that  the  institution  realised  that  its  catchment  was  becoming  smaller  in  its  location 
outside  of  Budapest  and  so  it  set  up  a  special  branch  campus  in  Budapest  to  counteract  this. 
Another HEI representative stated that his institution does not have a marketing manager, but it 
does send students into local schools to promote its higher education provision.  

In the case of public and private HEIs, the motivation for marketing services is similar  – since 
they  want  to  get  the  best  students  –  but  not  identical.  Whilst  recruiting  a  certain  number  of 
students  may  be  sufficient  for  a  private  HEI,  recruiting  the  best  is  important  for  public  HEIs, 
since it enables them to have a higher share of state-funded study places. This is because the best 
performing  applicants  are  also  those  which  can  receive  a  state-funded  place.  One  interviewee 
reported  that,  a  rising  profile  of  the  institution  enabled  it  to  recruit  more  high  performing 
students,  which  in  turn  increased  the  share  of  state-funded  places  at  the  institution.  In  another 

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case, the expert explained that marketing is important, but maintenance of prestige will always 
be more important. Indeed, one HEI explicitly stated that its ultimate goal would be to receive so 
many high performing applicants that all its students would be on state-funded places.  

Composition of governance and advisory boards 

Students  play  an  important  role  in  the  governance  structure  of  an  HEI  according  to  the 
interviewed  expert.  He  stated  that  student  representatives  have  up  to  a  25%  weight  in  most 
decisions of the academic senate. This is, however, not a result of the increasing responsiveness 
of  the  HEIs,  but  common  in  post-communist  higher  education  systems  and,  in  the  case  of 
Hungary, prescribed by the law.  

Since the mid-2000s all public HEIs now have an economic council, which is there to supervise 
the institutions regarding their spending. Various interview partners reference this body and one 
of the national experts interviewed has been a member of such a council. This expert, however, 
doubts  the  impact  of  this  board  on  the  actions  of  an  HEI,  especially  since  many  actions  are 
influenced  by  academic  considerations,  on  the  one  hand,  and  tight  budget  constraints,  on  the 
other. He states that the councils have not been able to make significant changes to the income 
levels and sources of the HEIs which they serve.  

Relationship with employers 

A  number  of  the  interview  partners  mentioned  that  providing  short  courses  and  training  for 
private sector businesses would be an interesting way to intensify the relationship with potential 
employers  and  to  gain  additional  income.  However,  this  source  of  funding  has  become  scarce 
following  the  financial  crisis.  One  of  the  experts  also  argues  that  HEIs  tend  to  be  reluctant  to 
enter into cooperation with employers.  

Entrance policies 

Since  2005,  there  is  a  central  entrance  examination,  which  means  that  HEIs  cannot  determine 
their  own  criteria  for  entry  to  higher  education.  This is criticised by  a number  of  experts  from 
HEIs. 

3.6  Quality and Relevance  

Satisfaction of students with study programme and support services 

There  is  no  regular  student  satisfaction  survey  in  Hungary.  In  2009  full-time  students  were 
surveyed. It showed students to be most satisfied with the infrastructure (especially the library) 
and the academic atmosphere and to be least satisfied with the opportunities to work alongside 
studies.  In  a  differentiation  between  universities  and  colleges,  the  data  showed  a  higher 

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satisfaction in the universities and a high level of satisfaction with the opportunities to work and 
with  cooperation  between  HEIs  and  business  in  the  colleges.  This  highlights  the  profile 
differences between these institution types. Due to lack of time series data, it is not possible to 
investigate how these assessments have changed over time. 

However,  a  study  by  Róbert  (Róbert,  2000)  points  to  a  differentiation  in  the  type  of  study 
programmes that HEIs offer, which was already occurring at the start of 2000. He differentiates 
between ‘marketable’ and ‘non-marketable’ programmes, the latter being those with a low value 
on  the  labour  market.  Using  this  concept,  (L.  Kiss,  2013)  distinguishes  between  ‘non-
marketable’  or  –  his  term  –  ‘low  status  Bachelor  programmes’  and  others  in  an  analysis  of 
applicant,  student  and  graduate  data.  On his definition,  he  finds  18  full-time  programmes  with 
around 7%  of  all  full-time  participants  which tend to  have  low  average  score  requirements  for 
entry.  These  programmes  are  largely  vocationally  orientated  programmes  in  the  areas  of 
agriculture, technology and teacher training.  

L. Kiss confirms that graduates of ‘low status’ Bachelor programmes tend to be less successful in 
the  labour  market,  with  a  higher  share  of  unemployed  persons  (53.9%  vs.  39.9%)  or,  if 
employed,  a  lower  net  income  (L.  Kiss  2013,  p.  67f).  This  suggests  that  the  lower  entry 
requirements  are  reflected  in  the  exit  outcomes  of  these  students.  This  is  an  interesting 
development, since it calls into question the ultimate quality of courses being offered by HEIs. 
Indeed interview sources have pointed out that, whilst quality assurance practices work relatively 
well  in  general,  there  remains  a  problem  with  some  private  providers  of  higher  education. 
However, on the basis of available studies it is not possible to investigate the change in size of 
this issue over time. 

Satisfaction of graduates with employment outcomes 

P. Kiss (2013) uses graduate career tracking data to analyse graduates’ job satisfaction. He finds 
that “new graduates tend to be satisfied with the personal conditions and the content of their jobs, 
while  feel  less  happy  with  the  opportunities  of  professional  and  career  development,  and  are 
most dissatisfied with their income” (P. Kiss 2013, p.281). But since no data on the development 
of  graduates’  satisfaction  over  time  were  found  to  be  available  it  is  impossible  to  make 
inferences regarding the impact of cost-sharing. 

Satisfaction of employers with labour market supply 

In  the  absence  of  available  data  on  graduates’  satisfaction  with  employment  outcomes, 
information on employers’ satisfaction with recruited graduates can be used as a proxy for the 
relevance  of  degree  programmes  at  HEIs.  A  2010  study  on  employers’  perception  of  graduate 
employability (Gallup Organisation, 2010, p. 24) reports that 89% of all interviewed employers 
agreed  that  recruited  higher  education  graduates  had  the  skills  required  to  work  in  their 
companies.  This  figure  suggests  that  Hungarian  higher  education  is  thoroughly  relevant  to  the 
demands  posed  on  graduates  on  the  labour  market.  However,  since  no  longitudinal  data  are 
available it is not possible to track changes over time or relate the finding to cost-sharing issues 
in any way. 

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3.7  Evaluation 

Hypothesis B looks at the responsiveness of HEIs and whether they have changed their provision 
or  clientele  in  relation  to  market  or  environmental  requirements.  The  Hungarian  case  provides 
evidence  of  significant  changes.  When  looking  at  this  topic  it  is  important  to  differentiate 
between the public and the private sectors and between universities and colleges.  

One  of  the  responses  to demand in  the  late  1990s,  particularly  taken  up by  the  private  college 
sector, was to enrol high levels of economics and business study students and, to a lesser extent, 
students  of  humanities.  These  fields  of  study  receive  only  few  state-funded  places,  so  changes 
here are equal to increases in private revenues. The share of new entrants in these fields of study 
shrank heavily during the 2000s.  

Other fields of study, particularly engineering and informatics at public universities, have tended 
to have stable enrolment figures. Since these fields receive a high share of state-funded places, 
this stability is related to public revenues. It is unlikely that these fields of study are of interest as 
source  of  private  revenues,  because  of  the  high  necessary  investment  in  equipment  and 
laboratories involved in offering study programmes in these fields.  

Since it is largely full-time study places which receive state funding, the provision of part-time 
courses – which is not regulated by the state – is another way for HEIs to gain private revenue by 
satisfying  student  demand.  Indeed  the  data  shows  large  fluctuations  in  part-time  provision  in 
both  public  and  private  sectors,  which  has  echoed  general  demand  (higher  in  the  early  2000s, 
dropping off from the mid-2000s).  

The  number  of  HEIs  in  public  and  private  sectors  did  fluctuate  marginally  over  the  period 
observed, and a high was achieved at the height of enrolment numbers. In the public sector, the 
number of colleges declined by three over the period observed, whilst the number in the private 
sector increased by three. In this context, the statistics on average size of HEIs have also shown 
how the overall decline in student numbers has affected HEIs. On average, HEIs are smaller than 
they  were  at  the  peak  of  demand.  Although  the  public  HEIs  have  returned  to  the  average  size 
they were at the start of the 2000s, the private sector colleges are on average one third smaller 
than  in  2001.  This  effectively  means  that  the  private  sector,  which  is  predominately  funded 
through private revenues via fee-paying study places, has not been able to gain a stable portion 
of the market. Instead it appears to expand and contract due to quantitative demand.  

This  is  related  to  the  attractiveness  of  study  places  in  the  public  sector.  Due  to  the  enrolment 
regulation  (Section  1.6)  which  determines  that  good  school  pupils  get  state-funded  places  in 
public universities and colleges, public universities and colleges tend to have a higher prestige 
value than private HEIs. This makes a study place in a public institution more attractive than one 
in  a  private  HEI  for  students,  and  a  downturn  in  overall  quantitative  demand  will  mean  that 
lower  performing  students  will  have  better  chances  of  getting  a  state-funded  place  in  a  public 
HEI.  

Besides  this,  the  participation  rate  of  students  stayed  relatively  stable  after  expansion until  the 
mid-2000s,  despite  an absolute  decline  in  the  number  of  students.  This means that universities 

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and colleges collectively did not manage to increase their relative participation rates, even with 
the emergence of what researchers have called ‘low status Bachelor programmes’ at the time of 
expansion.  These  are  more  open  than  other  programmes  (e.g.  for  lower  scoring  pupils),  but 
graduates often secure lower income jobs. This aspect of the quality of provision could not be 
further investigated because of a lack of time series on quality change.  

Overall  there  is  evidence  for  HEIs  responding  to  a  changing  environment,  but  the  coping 
strategies appear to be most closely related to changes in government policy and not market-led 
demands. 

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4.  HYPOTHESIS C: INCREASING PRIVATE FUNDING HAS 

A NEGATIVE EFFECT ON PARTICIPATION 

This  chapter  looks  at  data  relevant  to  Hypothesis  C,  which  states  that  as  private  funding 
increases,  costs  increase  to  students  and  their  families,  which  in  turn  may  have  an  impact  on 
quantitative student demand and on the composition of the student body.  

In order to assess this, it is important to look at:  

 

the real costs to students, including direct and indirect support provided by the state, which 
may discount the gross costs 

  how tuition fees are organised: Who pays and who does not pay? When do you pay – as a 

 

student or as a ‘successful’ graduate (with a well-earning job)? 
the  overall  trend  of  participation  rates  in  the  country  in  question,  i.e.  expanding,  stable  or 
contracting? 

4.1  Students’ Costs for Higher Education 

Student fees 

As shown in Table 2.1 above, the fee income rose in the period between 2005 and 2008.  Based 
on this information and the known share of students paying fees (i.e. not on state-funded places), 
it is possible to make an approximation for the average tuition fee costs per student for the public 
sector.  In  2005  this  was  126,598  forints  and  in  2008  it  had  risen  by  81%  to  229,374  forints 
(equivalent  to  approx.  760  euros  per  annum).  This  change  affects  around  half  of  the  student 
population, who are required to pay fees (but only around 20% of full-time students – see Figure 
2.4).  Current  information  from  EUROSTUDENT  V  (based  on  2013  data)  indicates  that  the 
average fee for fee-payers is now 316,430 forints per annum (1,050 euros). This would suggest a 
further  increase  in  fees  over  the  last  six  years.  Information  from  the  website  of  the  Higher 
Education Authority in Hungary shows that fees can be much higher for, for instance, medical 
and engineering courses. 

Although, therefore, fees may impact students differently depending on their field of study and 
their  HEI,  fees  currently  make  up  around  16%  of  a  student’s  monthly  expenditure  on  average 
(EUROSTUDENT V). The data further shows that on average 43% of the fee is paid for by a 
student’s parents and not directly from their monthly income.  
Student grants 

Whilst average fees were rising up until 2008, so was the real value of student grant aid. It went 
up  66%  in  the  university  sector  and  51%  in  the  college  sector  in  2009  compared  to  2005 
(constant  prices).  However,  since  the  grant  aid  is  largely  only  available  to  those  who  have 

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obtained  a  state-funded  study  place,  this  only  reduces  the  total  net  costs  for  students  already 
studying without fees. 

Figure 4.1: Total grant aid to students in million HUF, by type of public HEI 
(2005-2009) 

Note: Constant prices (2011). 
Source: Statistical Yearbooks / own calculations. 

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Figure 4.2: Average grant aid to students per annum in HUF, all public HEIs 
(2005-2009 

Note: Constant prices (2011). 
Source: Statistical Yearbooks / own calculations. 

Debt levels  

Not data on student debt was found to be available. 

Student loans 

Around  25%  of  all  students  were  receiving  a  loan  in  2005,  but  this  share  dropped  to  20%  in 
2009.  Almost  all  of  the  recipients  are  in  public  sector  universities,  where  in  2009  17%  of 
students were in receipt of a loan. See Figure 4.3. 

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Figure 4.3: Share and number of students receiving state-guaranteed loans, by 
type of public HEI (2005-2009) 

Source: Hungarian Student Loan Center. 

Indirect assistance 

There is no indirect assistance for students or their families in Hungary. 

Total student cost 

Those  students  on  fee-paying  places  do  not  receive  a  state-grant  and  seldom  have  a  state-
guaranteed loan. This means that their total costs are tuition fee plus living costs during studies. 
In contrast, students on state-funded places receive a merit-based grant and are often recipients 
of state-guaranteed loans. Their total costs during their studies are gross living costs minus state 
grant – see Table 4.1. This means that the costs for a student on a state-funded place are roughly 
two-thirds of those of a student paying fees and students paying fees tend to spend around 23% 
of their monthly expenditure on tuition costs. 

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Table 4.1: Net student costs per month (in forints), estimation 2013 

Fee-paying students 

Living costs 

Tuition fees 
State grant 
Total net monthly expenditure 

107,004 

31,643 

138,647 

Students on state-funded 
places 
107,004 

-14,258 
92,746 

Source: Estimates based on EUROSTUDENT V (2013) and own calculations for students not living with parents. 

Relative earnings 

The  relative  earning  potential  of  a  higher  education  graduate  has  remained  relatively  stable 
throughout the observed period. Graduates tend to earn around twice as much as persons, who 
have  completed upper  secondary  school  level,  but  not  gone  on to higher  education,  see  Figure 
4.4.  Using  data  from  graduates  in  both  2008  and  2010  shows  that  certain  subject  areas  – 
especially informatics, economics and engineering – have a very high earning potential (Varga, 
2013).  This  might partially  explain  the  dominant  role  that  the  economics  enrolments  played  in 
the college sector until around 2006, since it would seem a good investment for students.   

Figure  4.4  shows  the  relative  earnings  of  tertiary  education  graduates  compared  to  persons 
without a tertiary degree. The relative earnings of academics in Hungary are much higher than in 
any other European country included in the OECD’s comparative  data set, and among the non-
European  countries  are  only  surpassed  by  Brazil  and  Chile  (OECD,  2013,  pp.  113-114).  The 
peculiar evolution of participation rates (dark dotted line in Figure 4.4) suggests that there is no 
direct correlation between relative earnings and participation in higher education. 

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Figure 4.4: Relative average earning benefit of higher education graduates 
(2001-2011) 

Note:  Data  indexed  to  earnings  of  a  person  with  secondary  and  post-secondary,  non-tertiary  education  =100. 
Source: OECD data set.  

4.2  Participation Rates 

Since the decline in the overall number of entrants from around 2004 is largely in the private and 
in  the  public  college  sectors  (see  Figure  1.1),  both  of  which  having  high  levels  of  fee-paying 
students,  a  rise  in  fees  may  be  affecting  participation.  Indeed  the  number  of  students  has 
decreased  by  15%  between  2005  and  2011.  However,  at  the  same  time,  as  mentioned  above, 
since there is a concurrent demographic decline, the participation rate has not declined, but held 
relatively steady in the period (see Figure 1.2).  

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That  is  to  say  that  the  changes  to  the  cost-structure  of  higher  education  with  only  42%  of 
students  paying  fees  in  2011  instead  of  49%  in  2005  may  have  increased  the  propensity  for 
someone to go into higher education slightly, but not substantially.  

4.3  Composition of the Student Body 

At  present  Hungary  does  not  have  systematic  data  on  enrolment  composition  stretching  back 
over  a  substantial  period.  One  of  the  most  recent  international  studies  using  labour  force  data 
showed Hungarian higher education to be socially selective (data from 2009), with the chance of 
entering  higher  education  for  a  student  whose  parents  have  not  attained  higher  education 
themselves being around 0.6, i.e. the share of students with this background is only 60% of the 
share  of  the  total  population  with  this  background  (OECD,  2012,  p.102).  The  authors  of  a 
Hungarian  study,  which  used  the  results  of  institutional  surveys  on  their  respective  student 
populations give similar findings and state that the composition of the study body did not change 
much between 2007 and 2011(Garai & Veroszta, 2013).  

This is of itself interesting: since the average net costs to students has been dropping due to the 
increased share of students now able to get a state-funded study place, it could be expected that 
the more cost-sensitive students would have the chance to enter under such conditions. However, 
it would be necessary to have more in-depth research, which is not currently available, in order 
to see any big changes at the margins. 

4.4  Completion Rates 

There is no information available on this issue. 

4.5  Evaluation 

On the basis of the available data, it is difficult to evaluate the causes of the change in demand of 
students.  There  are  now  fewer  students  than  at  the  start  of  the  2000s,  but  there  are  also  fewer 
‘potential students’ in the sense that the typical student age group has declined by nearly 20%. 
Indeed on this relative measure, the participation rate has actually increased (from 24% in 2001 
to 32% in 2011, Figure 1.2).  

At the same time, the share of students receiving state-funded places has increased, and the fee 
revenue generated on average by HEIs has increased. This means that there are two very distinct 
groups of students in Hungary: (i) the student group, which is growing, who are on state-funded 
places and also receive state grants and (ii) the student group on fee-paying places, who cannot 
receive state support and are subject to rising fee levels. 

We  would  certainly  expect  these  student  groups  to  have  different  participation  rates,  but  the 
sparse  evidence  suggests  that  the  composition  of  the  student  body  has  remained  stable 
throughout the second half of the 2000s. 

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It  is  remarkable  to  note  in  the  context  of  these  developments  and  the  relatively  stable  earning 
benefits  of  higher  education  graduates  that  the  share  of  students  taking  out  a  student  loan 
dropped  substantially  between  2005  and  2009.  Whilst  this  may  be  related  to  the  insecurity 
caused by the financial crisis in 2008, it actually began already in the mid-2000s. This suggests 
concerns on the real return on investment of a higher education diploma and may be related to 
the  growth  or  impact  of  the  so-called  ‘low  status’  Bachelor  programmes  mentioned  in  section 
3.6.  

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5.  HYPOTHESIS D: INCREASING PRIVATE FUNDING 
AFFECTS STUDENT CHOICE OF HOW OR WHAT TO 
STUDY 

This  chapter  looks  at  data  relevant  to  Hypothesis  D,  which  states  that  as  private  funding 
increases,  costs  increase  to  students  and  their  families,  which  in  turn  will  have  an  impact  on 
students’ choice of how and what to study. Accordingly, this section looks at these topics: have 
student age, location or field of study and time to completion changed over time in relation to 
cost-sharing? 

5.1  Student Study Patterns 

Hungarian  higher  education  has  a  broadly  stable  average  age  profile  (specified  below  by  the 
median,  i.e.  maximum  age  of  50%  of  students)  for  all  three  main  sectors  of  Hungarian higher 
education – public universities, public colleges and private colleges. However, there have been 
some changes to the age profiles of the two types of higher education institution – universities 
and  colleges.  Over  time,  the  share  of  younger  students  (19-22)  has  decreased  in  the  college 
sector  (public  and  private  combined),  whilst  it  has  increased  in  the  university  sector  (public 
sector). This provides some evidence for students entering colleges at a later age. However, it is 
unclear  whether  this  is  the  result  of  different  student  behaviour  or  new  recruiting  strategies  of 
colleges.  In  both  public  and  private  sectors  the  age  group  of  30  plus  is  the  only  age  group  to 
show a real increase in the number of enrolled students (+39% for public colleges and +7% for 
private colleges).  

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Figure 5.1: Share of students in the respective age groups for public universities 
and public and private colleges combined (2001, 2005, 2010) 

Source: Statistics Hungary. 

5.2  Location of Study 

Based on the data available from the Higher Education Authority, there have been no changes to 
the mobility of students between regions of Hungary since 2005 (the first year of data available) 
– around one-fifth of students have had the same permanent address as the address of the HEI to 
which they have been admitted. This is, in fact, more a reflection of the importance of the capital 
Budapest as the centre for many of the most prominent Hungarian universities.  

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0%5%10%15%20%25%30%under 18181920212223242526-2930+2001 Universities2005 Universities2010 Universities2001 Colleges2005 Colleges2010 Colleges 
National Report for Hungary 

5.3  Field of Study 

In  section  3.1  we  have  already  seen  the  change  to  the  enrolment  by  field  of  study,  and 
particularly the decline in the number of students studying economics and humanities. Since we 
have data on the number of applicants to certain fields of study and the number of entrants to a 
field of study, it is possible to observe how this change has occurred. Figure 5.2 shows that the 
number  of  applicants  to  a  field  of  study  broadly  echoes  the  changes  to  the  total  number  of 
enrolments in that field of study. For instance, in 2001, 67% of applicants to economics obtained 
a study place for economics. Despite the drastic change in the number of entrants for economics 
between 2001 and 2010 (-46%), the selectivity index of the study programmes in that area has 
only increased slightly from 67% to 64%, i.e. 64% of applicants receive a place. This shows that 
the student demand has already been influenced by the chances of obtaining a study place. This 
is likely to be related to the two central mechanisms of higher education policy in Hungary – the 
number of state-funded places and the central application system. This suggests, in turn, that it is 
not the ‘pure’ demand of students which has affected the provision of study places.  

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Figure 5.2: Index of share of applicants by first subject choice to entrants by 
final subject field (2001, 2004, 2010) 

Note: Values greater than 100% mean that students who did not have the relevant subject as a first choice 
accepted a place later (e.g. after failing to be admitted to another subject).  
Source: Higher education application and admission data – Educational Authority / own calculation. 

5.4  Time-to-Completion 

There  is  no  information  available  on  this  issue.  However,  all  interview  partners  highlighted  a 
recent change that students are more and more frequently working alongside their studies. They 
associated this  phenomenon  with  the  increasing  challenges  students have  to  cover  the  costs  of 
studying through other income sources.  

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0%20%40%60%80%100%120%140%160%AgricultureHumanitiesEconomicsInformaticsLaw (and administration)National defence,military, public admin.EngineeringArtsArt mediationMedical and healthcareTeacher trainingSportsSocial sciencesNatural sciencesReligionHE vocationalTotal201020042001 
National Report for Hungary 

5.5  Evaluation 

The assumption behind Hypothesis D is that changes to cost-sharing may not simply affect the 
number of students, but instead affect what students are studying and where.  

There is an argument that students are more likely to stay close to home concerning their choice 
of HEI if they are trying to cut costs due to rising fees, for instance. However, the available data 
for  Hungary  provide  no  evidence  for  this,  nor  any  systematic  changes  in  students’  place  of 
residence. 

The same hypothesis also assumes that a rise in costs might lead to a rise in part-time studies, so 
that students can work alongside their studies. The interviews do indeed highlight the problems 
of  students  working  alongside  their  studies.  There  is  no  systematic  evidence  for  students 
studying in a less intensive manner, since the status of part-time student is not always equivalent 
with  less  intensive  studies,  but  simply  a  different  status  of  programme  (e.g.  there  are  no 
regulations on how many part-time students can be enrolled at an HEI).  

A  further  effect  could  be  that  students  begin  to  apply  to  different  types  of  study  programmes 
based  on  their  information  or  assumptions  on  the  specific  rate  of  return  for  certain  fields  of 
study.  The  data  presented  here  shows  a  high  congruence  between  applicants  and  chances  of 
gaining entry (Figure 5.2) since the index values by field of study remained relatively stable in 
the last ten years despite changes to the number of entrants (and therefore: study places) by field.  

Another  way  to  say  this  is that the HEIs  and  especially  the  state  –  through  state-funded  study 
places  –  determine  the  provision  by  field  of  study  more  strongly  than  does  student  demand. 
Indeed  there  is  evidence  that  the  provision  of  state-funded  study  places  is  being  used 
increasingly  strategically  by  the  state.  Overall,  therefore,  the  Hungarian case  presents  a  mixed 
model between market-like elements and relatively interventionist steering by the state. 

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6.  CONCLUSION 

The study of Hungary has shown the use of a dual-track funding system in order to extend higher 
education  capacity  beyond  a  size  which  could  feasibly  have  been  supported  through  public 
funding alone. Additionally, it shows a country which has had a strong expansion in provision 
until  the  mid-2000s,  but  is  now  subject  to  a  stagnation  largely  dependent  on  the  demographic 
shrinkage of the young population in Hungary.  

With  respect  to  Hypothesis  A,  there  has  been  an  increase  in  public  and  private  spending 
throughout  the  2000s,  so  that  institutional  revenue  was  on  the  increase  until  2008,  when  the 
global financial crisis effected funding. Funding revenue is generally provided through the state-
determined number of state-funded study places per subject area and HEI and the number of fee-
paying  places,  which  is  autonomously  determined  by  the  HEIs.  Tuition  fees  from  fee-paying 
students are therefore an integral part of HEI funding. It does seem that fee-revenue enabled the 
higher  education  sector  to  deal  with  the  growth  in  the  enrolment  early  2000s,  as  the  share  of 
students  on  fee-playing  places  increased  in  this  period.  In  this  period,  increases  in  private 
revenues led to the higher education system being better off, supporting Hypothesis A.  

After the financial crisis, the funding as share of GDP remained the same, but the drop in GDP 
led to a relative and proportional drop in absolute public funding. In this context, the concurrent 
drop in the number of students actually led to an increase in public funding per-student. In total 
then,  there  was  no  substantial  increase  in  private  revenues,  meaning  that  Hypothesis  A  is  not 
directly applicable to this latter period.  

On  an  institutional  level,  both  revenue  via  fees  and  state  funding  via  state-funded  places  have 
injected  volatility  into  HEI  revenues  since  neither  the  student  numbers  nor  the  rules  for  state-
funded study places remained stable. Therefore, the decrease in the overall number of students 
and  the  share  of  students  on  part-time  places  (for  which  there  are  few  state-funded  places) 
affected  the  revenue  of  individual  HEIs,  particularly  for  colleges.  There  is  some  evidence  that 
HEIs are struggling to cover their staff costs. This point was also raised in the interviews, where 
it was pointed out that some HEIs require staff to obtain project-based funding from competitive 
tenders (often from the EU) in order to cover their own staff costs.  

Despite  this,  the  student-to-staff  ratio  for  public  universities  and  colleges  has  remained  stable 
throughout  the  period  observed.  This  is  not  the  case  for  private  colleges,  where  it  has 
significantly  improved.  It  is  likely  that  this  improvement  is  related  to  the  quality  assurance 
requirements, but also more simply to the large drop in enrolment in this sector. The interview 
partners expect more mergers and closures of HEIs within the coming years.  

With  respect  to  Hypothesis  B,  there  have  been  some  developments  at  HEI  level,  but  both  the 
analysis and the interview partners point to these being related more closely to state regulations 
than to market influence.  

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The  discipline  profile  has  changed  over  the  period  observed,  with  the  initially  large  share  of 
students  studying  economics  decreasing  to  about  half  the  initial  size  by  2010.  These  students 
studied largely in the private colleges. At the same time, there is evidence that graduates of this 
subject area were successful in gaining well-paid jobs following graduation. Other disciplines – 
such as engineering and medicine –, which are predominantly financed by the state (state-funded 
places), have had relatively stable enrolment figures over the period.   

Part-time  provision  grew  during  the  growth  phase  of  Hungarian higher  education and dropped 
off in the mid-2000s. During expansion, the share of students on fee-paying places grew and then 
shrank  post  mid-2000s.  This  suggests  that  the  provision  of  part-time  places  –  which  is  not 
regulated by the state – was used to satisfy student demand not met by the public sector.  

There  has  been  no  growth  in  the  number  of  HEIs  in  both  public  and  private  sectors  over  the 
period observed, although a high was achieved at the height of enrolment numbers. In the public 
sector, however, the number of colleges declined by three over the period observed, whilst the 
number in the private sector increased by three. The resulting HEIs are of a lower average size in 
both sectors and in both types of HEI in 2010, following contraction of the  system. During the 
period  of  expansion,  researchers  noticed  the  emergence  of  what  they  call  ‘low  status 
programmes’. These are more  open than other programmes (e.g.  for lower scoring pupils), but 
graduates often secure lower income jobs. Contrariwise – according to the interviews – there is a 
common argument in Hungary that a decline in the size of the sector may entail improvements in 
quality.   

Under  the  circumstances  of  contraction,  it  would  be  a  rational  strategy  for  HEIs  to  strengthen 
their  recruitment  strategies.  However,  the  participation  rate  of  students  stayed  relatively  stable 
after expansion in the early 2000s. This means that universities and colleges did not manage to 
increase their relative participation rates and were therefore significantly hit by a declining base 
of potential students. In 2010, for instance, Hungary had 64,000 less students than in 2005.  

With  respect  to  Hypothesis  C,  the  assumption  of  increasing  private  funding  having  a  negative 
effect on student demand cannot be supported. However, this has to do – to some extent – with 
the  dual-tracking  tuition  fee  system.  This  means  that  there  are  two  very  distinct  groups  of 
students in Hungary: (i) the student group, which is growing, who are on state-funded places and 
also receive state grants and (ii) the student group on fee-paying places, who cannot receive state 
support and are subject to rising fee levels. 

We  would  certainly  expect  these  student  groups  to  have  different  participation  rates,  but  the 
sparse  evidence  suggests  that  the  composition  of  the  student  body  has  remained  stable 
throughout the second half of the 2000s. 

It  is  remarkable  to  note  in  the  context  of  these  developments  and  the  relatively  stable  earning 
benefits  of  higher  education  graduates  that  the  share  of  students  taking  out  a  student  loan 
dropped  substantially  between  2005  and  2009.  Whilst  this  may  be  related  to  the  insecurity 
caused by the financial crisis in 2008, it actually began already in the mid-2000s. This suggests 
concerns on the real return on investment of a higher education diploma and may be related to 
the growth or impact of the so-called ‘low status’ Bachelor programmes. 

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With respect to Hypothesis D, some changes to how and what students study are observable, but 
they  cannot  be  directly  linked  to  the  issues  of  cost-sharing.  Over  time,  the  share  of  younger 
students (19-22) has decreased in the college sector (public and private combined), whilst it has 
increased  in  the  university  sector  (public  sector).  This  provides  some  evidence  for  students 
entering  colleges  at  a  later  age.  However,  it  is  unclear  whether  this  is  the  result  of  different 
student behaviour or new recruiting strategies of colleges. In both public and private sectors the 
age  group  of  30  plus  is  the  only  age  group  to  show  a  real  increase  in  the  number  of  enrolled 
students – +39% for public colleges and +7% for private colleges.  

It  is  also  somewhat  unclear  as  to  whether  changes  to  the  provision  of  programmes  by  field  of 
study (and especially economics) is related to changes in supply and demand, mediated between 
HEIs and students, or due to state policy. Indeed it seems that the provision of state-funded study 
places is being used increasingly strategically by the state.  

Overall, therefore, the Hungarian case presents a mixed model between market-like elements and 
relatively interventionist steering by the state at the centre.  

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REFERENCES 

EUA. (n.d.). University autonomy in Europe : Hungary. Retrieved February 14, 2014, from 

http://www.university-autonomy.eu/countries/hungary/ 

Eurydice. (2013). National student fee and support systems 2012/13. Brussels: European 

Commission. Retrieved from 
http://eacea.ec.europa.eu/education/eurydice/documents/facts_and_figures/fees_and_suppor
t.pdf 

Gallup Organization. (2010). Employers ’ perception of graduate employability - Analytical 

report. Retrieved from http://ec.europa.eu/public_opinion/flash/fl_304_en.pdf 

Garai, O., & Veroszta, Z. (Eds.). (2013). Hungarian Graduates 2011. Budapest: Educatio Public 

Services Non-profit LLC. 

Havelda, B. (2010). Key elements of the Hungarian Student Loan Scheme. Budapest: Student 
Loan Center. Retrieved from http://www.iro.hr/userdocs/File/ACCESS/3. Hungary study 
visit/DIAK_Havelda_presentation.pdf 

Kiss, L. (2013). “Low-status” bachelor programmes. In O. Garai & Z. Veroszta (Eds.), 

Hungarian Graduates 2011 (pp. 67–92). Budapest: Educatio Public Services Non-profit 
LLC. 

Kiss, P. (2013). Graduates’ job satisfaction. In O. Garai & Z. Veroszta (Eds.), Hungarian 
Graduates 2011 (pp. 261–286). Budapest: Educatio Public Services Non-profit LLC. 

Mészáros, T. (2012). Gondolatok a magyar felsőoktatásról szóló vitákhoz. In Felsőoktatás-
finanszírozás. Nemzetközi tendenciák és a hazai helyzet (pp. 255–292). Budapest. 

National Development Agency. (2007). The New Hungary Development Plan: National 

Strategic Reference Framework 2007-2013 Employment and Growth. Budapest. Retrieved 
from http://www.nfu.hu/download/16836/80825_UMFT_angol_4_teljes.pdf 

OECD. (2012). Education at a Glance 2012: OECD Indicators. Paris: OECD Publishing. 

OECD. (2013). Education at a Glance 2013: OECD Indicators. Paris: OECD Publishing. 

doi:10.1787/eag-2013-en 

Róbert, P. (2000). Bővülő felsőoktatás – ki jut be? [Expanding higher education - you get it?]. 

Educatio, 1, 79–94. 

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Varga, J. (2013). Labour market success of Hungarian higher education graduates in 2011. In O. 
Garai & Z. Veroszta (Eds.), Hungarian Graduates 2011 (pp. 143–168). Budapest: Educatio 
Public Services Non-profit LLC. 

Statistical Yearbooks of Education available at http://www.nefmi.gov.hu/miniszterium/oktatasi-

statisztikak 

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APPENDIX: LIST OF INTERVIEWED EXPERTS 

Name 

Position/ Affiliation 

György Andor 

Vice rector of Budapest University of Technology and Economics  

Zsolt Barthel-Rúzsa 

Századvég Economic Research Co. 

György Bazsa 

Former rector of University of Debrecen 

Gábor Bolvári-Takács 

Professor of Hungarian Dance Academy 

György Drótos 

IFUA Horváth & Partners Management Consultants and Head of 
Department of Management Control, Corvinus University 
Budapest 

Zoltán Hauser 

Rector of the HEI Eszterhazy Karoly University College 

Dávid Nagy 

Chairman of National Student Union Conference 

István Ónodi 

Marketing director of John Wesley Theological College  

János Rechnitzer 

Vice rector of Széchenyi István University 

Péter Szabó 

József Vörös 

Rector of the HEI Kodolányi János University College 

Professor and former vice-president of University of Pécs  

Gabriella Wágner-Tomcsik 

Director of education and training, Confederation of Hungarian 
Employers and Industrialists 

All interviews were conducted in March 2013. 

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National Report for South Korea 

SOUTH KOREA 

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ACKNOWLEDGEMENTS 

The authors would like to acknowledge the support in data research and interpretation provided 
by Hwanbo Park, Ph.D. (Researcher, ODA Research Center at Seoul National University). 

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1.  INTRODUCTION 

1.1  Overview of Higher Education in South Korea  

Korea’s  higher  education  system  is  of  relatively  recent  origin.  Although  Korea  has  had 
‘academies’ of the Chinese model dating back to the sixth century (to which some can point to – 
dubiously  -  as  kinds  of  proto-universities),  the  only  modern  higher  education  to  predate  the 
Japanese  occupation  of  1910-1945  is  Ehwa  Women’s  University,  founded  by  American 
missionaries in 1886.95 Two other private universities (Yonsei and Korea) were founded during 
the Japanese occupation. Together, Ehwa, Yonsei and Korea had a grand total of 7,000 students 
when  liberation  came  in  1945.  For  obvious  reasons,  Korea’s  higher  education  system  was 
heavily influenced by the Japanese system, which itself was mostly a copy of an earlier German 
system. It promoted a very hierarchical version of higher education, with universities essentially 
run by a few very powerful professors. This happened to fit well with the traditional Confucian 
heritage of Korea’s indigenous system of higher education, which was based around a model of 
mentors-and-disciples.  

Education was a major preoccupation of the post-World War II Korean government. Denied their 
own  system  of  education  under  the  thirty-five  year  Japanese  education  (the  occupiers  placed 
heavy restrictions on access to education and at the higher levels ensured that it was conducted 
almost entirely in Japanese), there was an enormous pent-up demand for education as a means of 
social and economic advancement. Among the population at large, there was a Confucian view 
about  education  –  that  it  was  a  marker  both  of  virtue  and  of  social  status.  Additionally,  the 
government  had  some  explicit  ideas  about  how  to  use  education  in  the  service  of  national 
development, both in terms of human resources and the development of national culture. These 
two  perspectives  combined  to  create  the  phenomenon  popularly  known  as  ‘Gyoyuk  yolgi’  or 
‘Education Fever’ (Seth, 2002), a term Koreans use to describe the extremely high demand for 
education at all levels in their country.  

In  the  immediate  aftermath  of  the  war,  a  decision  was  made  to  create  a  single  ‘model’  public 
university. Keijo Imperial University, established as an elite institution for Japanese students in 
1925 and modeled on Tokyo University, was shut in 1945 but re-born in 1946 as Seoul National 
University, which today ranks in the top 100 research universities in the entire world. Since this 
occurred under American occupation, the re-founded institution had a distinctly American flavor 
in terms of its mission and organisation. This was not an entirely alien tradition; both Ehwa and 
Yonsei (originally known as Chosun Christian University) had some American ties through their 
missionary origins, and a significant number of Korean academics had received their training in 
the United States.  

95 Sung Kyun Kwan University, now owned by Samsung, is indirectly descended from a fourteenth-century 
Confucian academy. However, to call this institution, as it existed in the early twentieth century, a university would 
be a stretch. It was ‘refounded’ as a college in 1946. 

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The basic structure of the higher education system was set very early. In 1948, Bachelor degrees 
were defined as consisting of 180 credit hours of classes (later reduced to the current 140), and 
the  tripartite  division  of  university  studies  (i.e.  Bachelor/Master/Doctorate)  was  confirmed  in 
1952.  The  development  of  higher  education  was  given  an  unexpected  stimulus  by  the  Korean 
War. A number of colleges were founded in refugee camps in the period 1951-1954, and many 
of  these  colleges  were  given  legal  status  retrospectively;  the  government  gradually  began 
introducing quality standards after active hostilities ceased. Access to universities was governed 
through a set of competitive national exams. In a country that was very poor (per capita GDP in 
South Korea was lower than in Ghana in 1956) and which lacked a native ruling or commercial 
class,  the  exam  system  acted  as  a  guarantee  for  open  access  by  merit,  and  was  zealously 
protected by government.  

Student numbers rose quickly in the 1950s. Roughly 55,000 students were in place by 1957 and 
nearly  100,000  by  1960.  Much  of  this  occurred  in  private  universities  which  were  allowed  to 
open in increasing numbers, though their curriculum offerings were tightly monitored. In 1961, 
after enrolments in four-year colleges jumped 33% in a single year (to 134,000) , the government 
made a deliberate attempt to reduce university numbers by closing some private institutions and 
reducing intake at public ones. This was partly a reaction to students increasing political power 
(they had helped to overthrow Syngman Rhee in 1960) and partly because the government was at 
the time increasingly worried about the supply of skilled labour and wanted to divert enrolments 
from  ‘less  productive’  degree-level  studies  in  the  humanities  towards  vocational  qualifications 
which appeared more useful to industrial development. This was largely  unsuccessful; demand 
for education was – as might be expected in a Confucian society – more about acquiring social 
status than it was about achieving a high rate of return, and so parents were highly resistant to a 
reduction  in  access.  The  plan  gradually  unraveled  in  the  face  of  this  public  pressure;  by  1970 
enrolments were back up to 200,000 and further increased to 300,000 by 1975.  

After President Chun Doo Hwan came to power in a coup in 1981, enrolments began to increase 
rapidly.  Seeking  to  buttress  his  legitimacy,  Chun  sought  popular  approval  by  drastically 
increasing access to higher education; by 1985, enrolment had quadrupled to nearly 1.3 million. 
Partly,  this  was  a  function  of  allowing  new  private  universities  to  open,  and  partly  it  was  a 
function of opening a large number of new public regional universities. 

By  this  time,  two  significant  patterns  had  been  set  in  higher  education:  the  first  being  one  of 
funding  and  the  other  of  prestige.  The  funding  model  was  set  largely  by  the  pattern  of 
public/private allocation of seats: since the late 1950s, the share of students at private universities 
has  fluctuated  somewhat  but  generally  has  stayed  between  66%  and  75%.  Private  universities 
are, of course, almost entirely reliant on private tuition revenue for their income. However, even 
in public universities, students account for between 40-50% of total institutional income. Korea 
is thus an outlier among OECD countries in that only about 20% of funds in the higher education 
system come from government. In this sense, it is a much more market-driven system than that 
seen in any other country, including the United States.  

As  for  prestige,  Seoul  National  remained  the  country’s  ‘model  institution’  that  everyone  else 
wished to emulate. It was, as model institutions tend to be, highly selective, and highly  focused 

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on  research.  Within  the  capital,  two  other  private  universities  (Yonsei  and  Korea)  were  also 
considered  to  be  at  the  top  of  the  prestige  ladder.96  After  that  came  other  public  ‘national’ 
universities – notably the Korea Advanced Institute for Science and Technology, and a few more 
private  institutions  either  with  long  histories  (e.g.  Ehwa  Women’s  University)  or  very  specific 
high-technology  mandates  (such  as  the  Pohang  University  of  Science  and  Technology,  also 
known as POSTECH). At the bottom were public regional universities and the remainder of the 
public universities, and below them are the country’s junior colleges.  

Korea has also a significant system of non-traditional delivery of higher education. This is both 
because  of  the  fact  that  access  to  regular  universities  was  restricted  and  because  of  universal 
conscription,  which  forces  most  males  to  interrupt  their  studies.  It  therefore  has  a  system  of 
‘Self-Study’  Bachelor  degrees  in  which  students  are  required  to  read  widely  and  follow  texts 
along something like traditional curricula, but their progress is measured simply through a set of 
four challenge exams which must be passed in order to obtain a degree. Since 1972, it has had an 
Open University for long-distance learners (Korea National Open University, or KNOU) which 
awards 30,000 degrees annually. And, since the late 1990s, it also has a unique post-secondary 
institution called the Academic Credit Bank, which is a kind of degree-granter of last resort that 
allows students to obtain degrees by putting together credits from many different institutions. It 
is  the  country’s  largest  provider  of  degrees  –  with  over  50,000 per  year,  or  roughly  8%  of  all 
degrees awarded. 

As  of  2011,  there  are  156  private  universities  and  143  ‘junior  colleges’  (two-year  institutions 
awarding associate’s degrees in the American style) which collectively educate about 75% of the 
student  body.  This  is  a  deliberate  government  policy;  since  the  1950s,  the  government  has 
always preferred to spend public money on lower levels  of education, leaving higher education 
largely in the hands of private non-profit entities. There are just 30 public universities, of which 
10  are  considered  to  be  flagship  comprehensive  research  universities.  Collectively  they  teach 
25%  of  the  student  body,  but  about  30%  of  that  is  in  non-traditional  institutions  such  as  the 
Korea National Open University and the Academic Credit Bank. In addition, there are 24 public 
non-university  HEIs.  These  tend  not  to  be  equivalents  to  the  private  sector’s  ‘junior  colleges’, 
but rather are mostly cultural education institutions. Thus ‘non-university’ HEIs in Korea differ 
significantly between the public and private sector. 

1.2  Key Higher Education Stakeholders 

Korean Higher Education is organised on a much simpler basis than most European Systems. At 
the  top  of  the  system  is  the  Korean  Ministry  of  Education,  which  provides  funding  to  public 
institutions  through  an  annual  budget.  Another  important  government  agency  is  the  Korean 
Educational  Development  Institute  (KEDI),  a  rather  unique  organisation  that  is  both  the 
government’s main research centre and a kind of independent experimental laboratory  for new 
education schemes. The Academic Credit Bank, for instance, was once a branch of KEDI before 

96 Later, in the 1990s, two specialised institutes - POSTECH and the Korea Advanced Institute of Science and 
Technology (KAIST) - also rose to the top of the prestige ladder, but at this time the focus was almost entirely on 
institutes inside the capital. 

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it was spun-out into its own organisation. The other significant government agency is the Korea 
Scholarship Foundation, which operates the bulk of the loans and scholarship programmes in the 
country  (though  there  are  a  number  of  institutions,  including  the  Ministry  of  Labour,  the 
Government  Employees  Pension  Corporation  and  the  Korean  Teachers  Pension  Fund  that  all 
provide various forms of loans and scholarships for targeted segments of the population).  

A number of other ministries also have a role in the field of higher education. The Ministry of 
Science and Technology, for instance, has spent heavily to develop the Korea Advanced Institute 
of Science and Technology (KAIST) and the Ministry of Labour has invested considerable sums 
of money in the Korean University of Technology.  

The other major body of note is the Korean Council for University Education (KCUE). This is a 
membership organisation of Korean Universities (though membership is mandatory by law). In 
addition to representing the views of universities on higher education policy to government, it is 
also  the  de  facto  national  accrediting  agency,  conducting  both  institutional  and  program-level 
assessment  of  universities.  They  also  coordinate  institutional  admissions policies  and  practices 
and  provide  information  on  college  admissions  to  the  public,  and  try  to  develop  in-service 
programmes for faculty and administrative staffs.  

1.3  How Governments Fund Institutions 

Private  institutions  are  essentially  entirely  self-funded,  with  only  4%  of  funding  coming  from 
governments  (mainly  for  research).  However,  there  is  substantial  non-student  funding.  Major 
corporations  own  certain  universities:  Hyundai  owns  SyunkyunKwan,  while  POSCO  owns 
POSTECH;  they  subsidise  these  universities  as  they  in  part  serve  as  training  and  research  and 
development  facilities.  A  number  of  religious  colleges  –  particularly  Christian  ones  -  receive 
substantial  funding  from  the  communities  they  serve.  In  addition,  institutions  reap  the  usual 
income from sale of goods and services.  

Roughly sixty percent of total funding for public universities comes from government, primarily 
the  Ministry  of  Higher  Education  (MoHE).  According  to  Lee  (2002),  roughly  75%  of 
government funding comes from MoHE, with other funds coming from the Ministry of Science 
and  Technology,  the  Ministry  of  Commerce  and  Industry,  and  the  Ministry  of  Labour. 
Interestingly,  over  50%  of  government  transfers  to  institutions  are  for  research  rather  than 
teaching. It should be noted, however, that a 2006 OECD report on Korea remarked that given 
how many different agencies were involved in providing operating funds to universities, it was 
almost impossible to tell how much they were receiving in total.  

1.4  History of Cost-Sharing 

In South Korea, there has always been a significant element of cost-sharing. From the beginning 
(that is, from the formation of Seoul National University in the 1940s), tuition fees have played a 
substantial  role  in  the  funding  of  public  universities.  More  importantly,  though,  private 

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universities  have  always  played  a  major  role  in  the  South  Korean  university  system.  At 
independence,  the  main  universities  were  private  (Yonsei,  Korea,  Ehwa  Women’s  University) 
and  the  government  has  always  substantially  relied  on  private  universities  as  a  way  to  meet 
demand.  In  part,  this  was  a  deliberate  modeling  on  the  Japanese  system  (which  is  also 
substantially  private),  but  in  part  too  it  was  a  reflection  of  government  priorities.  The  Korean 
government very deliberately delayed expanding higher education until about 1980, the better to 
focus its attention on developing primary and secondary education (to a certain degree, there was 
also a political dimensions to keeping student numbers low as students had played a significant 
role in the overthrow of Syngman Rhee in 1960 and in the Gwanju uprising of 1979). As a result, 
the government was quite happy to see private institutions – which were almost entirely funded 
by tuition fees – take on the role of ‘demand absorption’.  

Thus,  Korea  has  more  or  less  always  been  in  a  situation  where  75%  of  students  are  in private 
universities  –  (i.e.  where  student  revenue  has  constituted  nearly  100%  of  the  budget)  and  the 
remainder are in more publicly subsidised, but still fee-paying institutions. In general, students at 
public institutions pay about half of what students at private institutions pay, though tuition can 
vary significantly both by institution and by program. 

1.5  History of Enrolment  

In  the  1990s,  attendance  at  Korean  HEIs  nearly  doubled,  going  from  just  over  1.8  million  in 
1991 to an all-time high of 3.55 million in 2002. After that, enrolment fell somewhat, mainly due 
to demographic shifts. 

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Figure 1.1: Total undergraduate and graduate enrolment (1991-2011)  

3 500 000

3 000 000

2 500 000

2 000 000

1 500 000

1 000 000

500 000

0

1
9
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1
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0
2

Undergraduate

Graduate

Source: Korean Education Statistics Service.97 

While  the  flattening  of  overall  enrolment  may  have  been  driven  by  demographics,  Figure  1.2 
shows that there  were still large changes occurring in the composition of enrolment. Basically, 
students  migrated  out  of  two-year  junior  colleges  and  into  four-year  institutions.  The  most 
significant  movement  was  in  the  private  sector  where  enrolments  in  universities  went  up  by 
200,000  while  enrolment  in  private  colleges  dropped  by  an  equivalent  amount  over  the  period 
2002-2011. The shift in the public sector was slightly less pronounced but in absolute numbers 
was of roughly the same magnitude. 

97 Available at http://cesi.kedi.re.kr/ 

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Figure 1.2: Enrolment by sector and level (1991-2011) 

2 000 000
1 800 000
1 600 000
1 400 000
1 200 000
1 000 000
800 000
600 000
400 000
200 000
0

1
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1
1
0
2

Public University

Public non-University

Private University

Private Non-University

Source: Korean Education Statistics Service. 

Within the university sector (that is, excluding junior colleges), enrolment in public and private 
universities  have  moved  more  or  less  in  tandem  over  the  last  two  decades.  During  both  the 
period of enrolment growth and the period of enrolment consolidation, the proportion of students 
in the private sector crept up only slightly, from 75% to 77% - See Figure 1.3. 

Figure 1.3: Private university enrolment as a proportion of all university 
enrolment (1991-2011) 

79%

78%

77%

76%

75%

74%

73%

72%

1
9
9
1

2
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2

7
0
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2

8
0
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2

9
0
0
2

0
1
0
2

1
1
0
2

Source: Korean Education Statistics Service. 

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Figure 1.4 shows participation rates of students in the ‘best four years’, that is the four age years 
with the highest participation rate, from both university and non-university institutions. In terms 
of participation rates, South Korea’s performance is slightly more spectacular than it is in terms 
of raw numbers, as the former almost tripled while the later only doubled. Part of this has to do 
with demographic decline – nationally, this age cohort decreased in size by 27% over the decade 
in question; this would have increased participation rates even without any growth in the number 
of students. In fact, something else is at work here –an increasing proportion of the student body 
is made up of ‘traditional’-aged students, particularly 18-19 year olds. 

This may reflect a changing pattern of military service. Young Korean males must spend roughly 
24  months  in  the  military  (slightly  longer  at  the  beginning  of  our  period),  though  the  actual 
enlistment  period  depends  on  the  service.  Generally  speaking,  males  tend  to  do  this  service 
within  their  undergraduate  period  –  that  is  they  transition  from  secondary  to  tertiary,  spend  a 
couple  of  years  in  higher  education,  perform  their  military  service  and  then  return  to  higher 
education  (this  is  why  the  age-distribution  of  Korean  students  is  somewhat  flatter  and  more 
extended  than  what  one  sees  in  most  other  countries).  However,  it  is  also  possible  that  this 
pattern has changed over time. If twenty years ago more youth began their conscription period at 
18, it would explain the change in the age profile. Similarly, the fact that an increasing number of 
women (who are not subject to conscription) are attending higher education in Korea would also 
have the effect of changing the age profile. 

Figure 1.4: ‘Best four years’ participation rates (1991 to 2011) 

50%

45%

40%

35%

30%

25%

20%

15%

10%

5%

0%

1
9
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2
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2

9
0
0
2

0
1
0
2

1
1
0
2

Note: For 2006 and 2007, the best four years were 18-21; otherwise 19-22. 
Source: Korean Education Statistics Service. 

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2.  HYPOTHESIS A: AS PRIVATE FUNDING INCREASES, 

INSTITUTIONAL REVENUE INCREASES  

This  chapter  looks  at  data  relevant  to  Hypothesis  A,  which  states  that  as  private  funding 
increases,  institutional  revenue  increases,  but  only  if  public  funding  remains  constant.  That 
means that it will examine whether: 

 
 
 

there has been an increase in private funding 
there has been a concurrent change to public funding 
there has been a total increase in funding and how this is related to changes in private and 
public revenues. 

Changes  in institutional  funding  will  be  considered  both  in  terms  of  total  institutional  revenue 
and relative to the number of students. 

2.1  Changes in Institutional Revenues over Time 

Korea  is  an  anomaly  among  countries  in  our  study  with  respect  to  data  availability.  In  most 
countries, data on public spending in public institutions is the easiest data to retrieve, with data 
about private spending (either in public or private institutions) generally less easily obtainable. In 
Korea, data on private institutions’ revenues are easily available but data on public institutions is 
not  published  in  a  coherent  or  consolidated  manner.  This  appears  to  be  due  to  the  fact  that 
expenditures on higher education are divided between the Ministry of Education, the Ministry of 
Labour, the Ministry of Science and Technology and the Ministry of Industry.  

In  order  to  estimate  public  funding  at  public  institutions,  this  study  relies  on  OECD  data  on 
public financing, subtracting the amounts known to have been spent in the private sector. Private 
spending at public universities has been estimated simply by multiplying enrolments by average 
tuition fees, both of which appear to be reliable indicators. However, the result of this exercise 
leads to some results that are quite at odds with what the secondary literature indicates to be the 
actual  situation  in  South  Korea  (namely,  that  public  institutions  receive  60%  of  their  funding 
from  government).  Given  the  detail  and  apparent  reliability  of  the  private  university  data,  it 
seems likely that the data South Korea provides to the OECD is substantially under-estimating 
public contributions to public HEIs. A possible reason for this may be that it includes only the 
Ministry  of  Education  expenditures,  in  which  case  it  is  probably  underestimating  total 
expenditures  by  between  30%  and  35%  (see  Section  1.4),  which  would  put  it  very  close  to 
figures quoted by the secondary sources. There is no way of verifying this independently.  

Because  of  this  irregularity,  in  this  section  the  data  for  the  public  and  private  sectors  will  be 
presented  separately  and  together.  Readers  should  keep  in  mind  the  caveat  about  the  reduced 
reliability of the data for public institutions. 

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Figure  2.1  shows  revenue  by  source  in  the  private  institutions  that  house  75%  of  all  Korean 
students. As can clearly be seen, government revenue does not enter the scene until about 1999, 
and then only in tiny amounts, never amounting to more than 0.4% of total funding. In the early 
1990s, more than half of all funds in these institutions came from non-student sources – such as 
support  from  religious  communities  or  related  industries.  However,  in  the  second  half  of  the 
1990s, the  student  portion  of  funding  jumped  from  about  45%  to  about 65%  which is  roughly 
where it has stayed since.  

Overall, funding in private sector institutions has increased tenfold in real terms. This looks like 
an enormous jump, much larger than in other countries in the study. What is worth keeping in 
mind, though, is that GDP grew enormously in Korea during this period and that these kinds of 
increases are quite normal in a growing economy. 

Figure 2.1: Private university revenues by source in million won (1991-2010)98 

20 000 000
18 000 000
16 000 000
14 000 000
12 000 000
10 000 000
8 000 000
6 000 000
4 000 000
2 000 000
0

1
9
9
1

2
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9
1

3
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1

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9
1

5
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6
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0
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1
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2

8
0
0
2

9
0
0
2

0
1
0
2

Students

Other Private

Government

Note: Constant prices (2011). 
Source: Ministry of Education; Korean Education Statistics Service. 

Figure  2.2  shows  the  same  data  for  public  institutions.  Because  OECD  data  is  required  to 
calculate the figures, the time series can only start in 1998, which is the earliest date for which it 
is  available.  To  reiterate:  the  student  figure  is  a  simple  multiplication  of  students  enrolled  by 
average fees, the government figure is based on OECD data (adjusted for known expenditures in 
private institutions), and it is likely that the government figure is an underestimate, possibly on 
the order of 30-35%.  

What the data shows is an increase in total funding in real terms from 3 trillion to 8 trillion won 
between  1998  and  2009.  Student  contributions  over  this  period  increased  slowly;  government 
contributions  fluctuated  wildly.  There  was  a  sharp  decrease  in  government  funding  coinciding 

98 As of October 2013, 1 euro = 1452 won. 

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with  the  Asian  currency  crisis  of  1998,  in  which  Korea  was  quite  badly  affected.  After  that, 
however,  contributions  began  increasing  quite  rapidly.  In  real  terms,  government  increased  its 
funding five-fold between 2001 and 2009.  

Figure 2.2: Public university revenues by source in millions won (1998-2009) 

9 000 000

8 000 000

7 000 000

6 000 000

5 000 000

4 000 000

3 000 000

2 000 000

1 000 000

0

8
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9
0
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2

Student

Government

Note: Constant prices (2011). 
Source: Ministry of Education; Korean Education Statistics Service ; Higher Education in Korea99. 

Figure 2.3 simply combines the two sets of data. Overall, sector-wide income rose from 10 to 25 
trillion  won  in  real  terms.  Growth  came  from  all  three  revenue  sources,  but it  was  the  student 
portion  that  increased  the  most.  In  absolute  terms,  the  largest  growth  came  from  increasing 
student  fees,  which  rose  from  7.3  to  15.6  trillion  won;  however,  in  proportional  terms  it  was 
government funding which rose fastest (if also most unevenly). 

99 Statistical service, available at http://academyinfo.go.kr. 

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Figure 2.3: Total university revenues by source in million won 

30 000 000

25 000 000

20 000 000

15 000 000

10 000 000

5 000 000

0

8
9
9
1

9
9
9
1

0
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2

1
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2
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8
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2

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2

Government

Student

Other private

Note: Constant Prices (2011) 
Source: Ministry of Education; Korean Education Statistics Service; Higher Education in Korea.  

Figure 2.4 shows the same data in a slightly different way, by displaying university funding as a 
percentage of Gross Domestic Product (GDP). Here, the increase in funding looks considerably 
less dramatic, though the increase is still impressive. In the wake of the currency crisis, there was 
a dip in expenditures, but apart from that, expenditures have been increasing steadily from 1.6% 
of GDP to 2.2% of GDP. 

Figure 2.4: University funding by source as a percentage of GDP 

2,5%

2,0%

1,5%

1,0%

0,5%

0,0%

8
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Government

Student

Other private

Source: Ministry of Education; Korean Education Statistics Service; Higher Education in Korea. 

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Finally, we can look at revenue per student, shown in Figure 2.5. Because student numbers have 
grown so much, the increase in real funding per student has not increased nearly as quickly as 
total revenues. Still, in real terms, revenues per student were up by roughly two-thirds between 
1998 and 2009. As with total revenues, the absolute increase was largest for student income, but 
proportionately largest for government income. 

Figure 2.5: Revenue per student by source in million won (1998-2009) 

12

10

8

6

4

2

0

8
9
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9
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1

0
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2

8
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2

9
0
0
2

Government

Student

Other Private

Note: Constant prices (2011). 
Source: Ministry of Education; Korean Education Statistics Service; Higher Education in Korea. 

In  summary,  there  can  be  no  doubt  that  the  amount  of  funding,  both  public  and  private,  has 
increased  immensely  during  the  period  in question.  Apart  from  a  blip in public  funding  which 
followed  the  currency  crisis  of  1998,  all  forms  of  income  have  been  increasing  steadily, 
regardless of how they are measured. 

2.2  Institutional Expenditures 

In the previous section we found that institutional income rose. In this section we explore how 
that revenue was used. 

Unfortunately, there is not much in the way of available data on spending in Korean HEIs. What 
can be done, however, is look at changes in students-per academic staff ratios. Figure 2.6 looks 
at this for private universities, 2.7 for public universities and 2.8 for the system as a whole. 

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Figure 2.6: Revenue per student in million won and students-per academic staff 
ratio at private universities (1998-2009) 

60

50

40

30

20

10

0

12

10

8

6

4

2

0

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8
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9
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2

Student:professor ratio (left axis)
Students-per-academic staff ratio (left axis) 

Revenue per Student (right axis)

Source: Ministry of Education; Korean Education Statistics Service; Higher Education in Korea.  

Figure 2.7: Revenue per student in million won and students-per-academic staff 
ratio at public universities (1998-2009) 

18

16

14

12

10

8

6

4

2

0

45

40

35

30

25

20

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9
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Student:professor ratio (left axis)
Students-per-academic staff ratio (left axis) 

Revenue per Student (right axis)

Source: Ministry of Education; Korean Education Statistics Service; Higher Education in Korea.  

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Figure 2.8: Revenue per student in million won and student-per-academic staff 
ratio at all universities (1998-2009) 

50
45
40
35
30
25
20
15
10
5
0

12

10

8

6

4

2

0

8
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2

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2

9
0
0
2

Students-per-academic staff ratio (left axis) 
Student:professor ratio (left axis)

Revenue per Student (right axis)

Source: Ministry of Education; Korean Education Statistics Service; Higher Education in Korea.  

In  both  the  public  and  private  university  sectors,  the  number  of  students  per  academic  staff 
followed the same trajectory – up slightly in the early 2000s and then down slightly in the latter 
half of the decade so that the ratio in 2009 was virtually identical to the one in 1998. However, 
this occurred at the same time as university revenue – particularly from students – was increasing 
fairly  sharply.  To  the  extent  that  low  student-teacher  ratios  are  indicative of  a  quality  learning 
environment, this is an odd result as it implies that learning conditions were getting worse even 
as income was rising. The explanation for this seems to be that a substantial amount of the new 
money  going  into universities  was  for  purposes  other  than  teaching.  This was,  after  all,  an  era 
when  the  Korean  government  was  sharply  increasing  its  investments  in  scientific  research 
(through programmes such as Brain Korea 21), graduate studies and the like. Presumably also, 
professors would have needed significant increases in pay roughly in line with overall economic 
growth, which would have limited funds available for reducing student-teacher ratios. 

2.3  Evaluation 

This  section  posed  two  questions  at  the  outset:  “did  cost-sharing  increase  total  funding?”  and 
“how  was  additional  income  spent”?  The  answer  to  the  first  question  is  clearly  yes.  Student 
funding  through  tuition  fees  increase  substantially,  but  so  too  did  government  funding  and 
income  from  other  sources.  Indeed,  one  of  the  reasons  that  there  can  be  no  suggestion  that 
private  funding  displaced  public  funding  is  that  there  was  almost  no  public  funding  to  begin 
with. 

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As for the question of how extra money was spent, it seems to have been spent on a combination 
of higher professor salaries and increased research-intensity. It does not, for the most part, seem 
to have resulted in improvements in student-faculty ratios. 

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3.  HYPOTHESIS B: AS THE INCENTIVES TO EARN PRIVATE 
FUNDING INCREASE, INSTITUTIONS BECOME MORE 
RESPONSIVE TO STUDENT DEMAND 

This  chapter  looks  at  data  relevant  to  Hypothesis  B,  which  states  that  as  incentives  to  earn 
private  funding  increase,  institutions  become  more  responsive  to  user  demand.  However,  this 
expected  effect  is  conditional  on  the  attractiveness  of  these  private  revenues  and  whether 
increasing these revenues has trade-off effects for the overall behaviour or prestige of HEIs.  

Various aspects of responsiveness will be examined, including changes to provision, enrolment 
and the connection between HEIS and users. If no changes to responsiveness are visible, this is 
likely  related  to  the  incentive  structure  present  in  the  higher  education  system,  which  might 
favour other behaviours such as the maximisation of public over private funding. 

3.1  Enrolment by Discipline  

One  hypothesis  about  the  effects  of  fees  is  that  they  make  institutions  desirous  of  increasing 
revenues by focusing on programmes which are popular or lower-cost courses (these tend to be 
‘soft’  disciplines,  paper  and  pencil  subjects-areas).  This  may  lead  to  overall  changes  in  the 
discipline profile of a national higher education system.  

This  hypothesis  is  to  some  extent  moot  in  South  Korea.  The  country’s  very  large  private 
university  sector  is  already  heavily  tilted  towards  cheaper  fields  –  notably  social  science, 
business  and  law.  Very  little  teaching  is  done  in  education  or  science,  though  engineering 
enrolments are a major component of private institutions. 

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Figure 3.1: Distribution of enrolments by field of study and sector 

100%

80%

60%

40%

20%

0%

Education

Engineering

Public

Private

Humanities/Arts

Soc Sci, Bus, Law

Science, Math, Comp

Health, Welfare

Other

Source: Korean Education Statistics Service. 

Looking  specifically  at  changes  in  enrolment,  we  see  very  little  evidence  of  any  kind  of 
enrolment  shift  over  the  past  decade.  Engineering  is  down  slightly;  health  and  ‘other’  are  up 
slightly. This is despite the fact that tuition does vary somewhat by fields of study, both in the 
private  and  public  sectors,  with  fees  in  engineering  and  performing  arts  being  substantially 
higher than in other fields. 

Figure 3.2 Distribution of enrolment by field of study in various years 

100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%

1999

2003

2007

2011

Education

Humanities/Arts

Soc Sci, Bus, Law

Science, Math, Comp

Engineering

Health, Welfare

Other

Source: Korean Education Statistics Service . 

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3.2  Enrolment Patterns by Mode  

In  some  countries  the  fee  structure  may  make  it  advantageous  for  institutions  to  increase  the 
number of part-time students. One hypothesis about the effects of cost-sharing is that it may lead 
to a shift of students from one mode of study to another.  

However, this hypothesis is difficult to test in Korea because the country’s statistical system does 
not distinguish between students who are full- and part-time. Nonetheless, it has been observed 
that  while  part-time  studies  are  becoming  more  popular  in  Korea  at  the  graduate  level 
(particularly for MBAs), they are relatively rare at the undergraduate level (except at the Korean 
National Open University) 

3.3  Enrolment Composition  

Another  hypothesis  about  fees  is  that  they  will  encourage  institutions  to  be  more  active  in 
selecting students who are associated with higher revenue streams. This is something of a moot 
point  in  Korea,  as  75%  of  students  are  already  in  full-fee-paying  programmes  at  private 
universities. 

However,  there  are  certainly  indications  that  Korean  universities  have  become  more 
entrepreneurial  as  domestic  student  numbers  have  stopped  rising.  Figure  3.3  shows  the  rapid 
increase of international students at Korean universities over the past decade. These enrolments 
rose more than tenfold between 2003 and 2011, from 4,000 (0.2% of total enrolment to 44,000 
(2% of total enrolment). Universities do not receive ‘extra’ money from these students as a result 
of higher fees – their tuition rates are the same as for domestic students – but they represent extra 
revenue nonetheless. 

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Figure 3.3: International student enrolment (2003-2011) 

50000
45000
40000
35000
30000
25000
20000
15000
10000
5000
0

3
0
0
2

4
0
0
2

5
0
0
2

6
0
0
2

7
0
0
2

8
0
0
2

9
0
0
2

0
1
0
2

1
1
0
2

Public University

Public non-university

Private University

Private non-University

Source: Ministry of Education. 

3.4  Diversity of Provision  

Another  way  in  which  cost-recovery  affects  institutional  behaviour  is  in  the  way  it  creates 
incentives  for  new  universities  and  new  programmes  to  proliferate  and  diversify.  Clearly,  in 
South  Korea,  the  system  was  diversifying  through  the  1990s  through  the  proliferation  of  both 
four- and two-year institutions in the private sector. When demand stopped increasing, so too did 
the  number  of  university-level  institutions  –  indeed,  in  the  two-year  sector,  the  number  of 
institutions  decreased  slightly  in  the  2000s,  presumably  due  to  the  fall  in  enrolments  noted 
earlier. Public 2-year institutions closed as well, though this was mostly due to mergers made for 
reasons of efficiency. 

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Figure 3.4: Number of HEIs by sector (1991-2011) 

180
160
140
120
100
80
60
40
20
0

1
9
9
1

2
9
9
1

3
9
9
1

4
9
9
1

5
9
9
1

6
9
9
1

7
9
9
1

8
9
9
1

9
9
9
1

0
0
0
2

1
0
0
2

2
0
0
2

3
0
0
2

4
0
0
2

5
0
0
2

6
0
0
2

7
0
0
2

8
0
0
2

9
0
0
2

0
1
0
2

1
1
0
2

Public University

Public Non-University

Private University

Private Non-University

Source: Korean Education Statistics Service. 

With respect to diversity in programming, it is difficult to reach many conclusions as Korea does 
not  centrally  record  the  number  of  programmes  on  offer.  Institutions  do  have  considerable 
autonomy  in  offering  courses,  so  one  might  come  to  the  conclusion  that  diversity  must  have 
increased over time. On the other hand, some of the central agencies which oversee accreditation 
have fairly tight rules about what constitutes a degree programme, so this would limit the urge to 
diversify too much.  

3.5  Outreach Practices  

There is no information available on outreach practices in South Korea. 

3.6  Quality and Relevance  

A final hypothesis about whether cost-sharing affects institutions has to do with whether it pays 
greater  attention  to  ‘customers’,  whether  those  are  defined  as  students  or  businesses. 
Unfortunately, there do not appear to be any surveys in place to measure this in South Korea. 

3.7  Evaluation  

The broad hypothesis that was tested in this section was “have institutional strategies changed to 
maximise revenue from private sources”. This was done by looking at six sub-hypotheses, which 

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will  be  briefly  reviewed  here  before  attempting  to  assess  whether  there  was  an  overall  effect. 
There is very little evidence on which to base many conclusions on this subject.  

The  first  sub-hypothesis  relates  to  whether  the discipline profile  of  HEIs  in  a country  changed 
(e.g., increasing offers in paper-and-pencil subjects and fewer provisions in expensive lab-based 
areas, or focus on more popular subjects) in response to a change in cost-sharing policies. The 
evidence here appears to be “no”. There has been no notable shift in enrolment from one field of 
study to another. 

The second sub-hypothesis relates to whether there has been any change in modes of study, such 
as  an  increase  in  part-time  provision,  with  the  aim  of  increasing  private  revenue.    While  part-
time studies are becoming more popular in Korea at the graduate level, they are relatively rare at 
the  undergraduate  level.  The  third  sub-hypothesis  has  to  do  with  institutions  changing  in 
enrolment  composition  to  maximise  revenue,  such  as  by  recruiting  more  international  (non-
domestic) students paying international student fees. Here, fairly clearly, the answer is  yes.  As 
soon as domestic expansion slowed, institutions began focusing more on recruiting international 
students.  These  students  were  not  as  lucrative  as  they  are  in  jurisdictions  like  England  and 
Canada, because they do not carry a higher fee than domestic students, but they represent extra 
revenue nonetheless. 

The fourth sub-hypothesis is related to any change that had occurred in the degree of diversity in 
higher  education  providers,  such  as  more  private  institutions,  or  more  programmes  offered  by 
public  institutions.  Here  there  are  some  difficulties  in  analysis.  Clearly,  Korea’s  free  market 
system, which is essentially entirely powered by private funds, provides the possibility of much 
wider  availability  of  programmes  – if  new  money  exists  to  support them.  However,  as  student 
numbers  have  started  to  level  off,  some  institutions  are  disappearing.  Also,  while  the  vast 
profusion of private institutions has given students a much greater choice of institution, the level 
of  regulation  over  programme  offerings  limits  the  extent  to  which  that  translates  into  greater 
choice of programmes. 

The  fifth  and  final  sub-hypothesis  has  to  do  with  quality  and  relevance.  Did  students  and 
graduates  become  more  satisfied  with  the  options  available  to  them?  Did  graduates  become 
satisfied with their employment outcomes? And were employers satisfied with quality of recent 
graduates?  Unfortunately,  no  data  were  available  either  from  employers  or  students  on  this 
question. 

In summary, it is difficult to say that much has changed in Korea as a result of policy changes in 
our period of interest, partly because of a lack of data but partly also because of a lack of policy 
changes. Although fees are high and rose throughout this period, there was the accumulation of a 
number  of  changes  in  fee  levels  at  the  institutional  level  rather  than  a  change  in  government 
policy. To the extent that there are data, there does not appear to be much change in strategy, but 
then neither was there any change in cost-sharing policy. 

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4.  HYPOTHESIS C: INCREASING PRIVATE FUNDING 
HAS A NEGATIVE EFFECT ON PARTICIPATION 

This  chapter  looks  at  data  relevant  to  Hypothesis  C,  which  states  that  as  private  funding 
increases,  costs  increase  to  students  and  their  families,  which  in  turn  may  have  an  impact  on 
quantitative student demand and on the composition of the student body.  

In order to assess this, it is important to look at:  

 

the real costs to students, including direct and indirect support provided by the state, which 
may discount the gross costs 

  how tuition fees are organised: Who pays and who does not pay? When do you pay – as a 

student or as a ‘successful’ graduate (with a well-earning job)? 

the  overall  trend  of  participation  rates  in  the  country  in  question,  i.e.  expanding,  stable  or 
contracting? 

4.1  Students’ Costs for Higher Education  

South Korea differs from some of our case studies, in that there was no sudden change in tuition 
policy.  Rather,  tuition  fees  have  risen  steadily  in  both  public  and  private  sectors  over  the  past 
twenty years. In the private sector, where roughly 75% of students are enrolled, fees rose fairly 
steadily from 4 million won (2,750 euros) to 7 million won (4,820 euros) in 2009, with only a 
slight  pause  during  the  Asian  currency  crisis  of  1998.  Fees  at  public  institutions  more  or  less 
mirrored this evolution, with fees moving from about 2 million won (1,375 euros) to 4.5 million 
won (3,100 euros).  

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Figure 4.1: Average student fees in won over time (1991-2011) 

9 000 000

8 000 000

7 000 000

6 000 000

5 000 000

4 000 000

3 000 000

2 000 000

1 000 000

0

1
9
9
1

2
9
9
1

3
9
9
1

4
9
9
1

5
9
9
1

6
9
9
1

7
9
9
1

8
9
9
1

9
9
9
1

0
0
0
2

1
0
0
2

2
0
0
2

3
0
0
2

4
0
0
2

5
0
0
2

6
0
0
2

7
0
0
2

8
0
0
2

9
0
0
2

0
1
0
2

1
1
0
2

Public

Private

Average

Source: Ministry of Education. 

Since 2009, fees have been roughly steady in nominal terms. There are two reasons for this. The 
first  is  that  with  declining  youth  numbers,  competition  between  institutions  is  genuinely 
becoming more intense and they fear that raising tuition will cost them new students. The second 
reason  has  been an upsurge  in political  pressure  surrounding  the  issue  of  tuition.  In  2008,  Lee 
Myung-bak was elected to the Presidency in part on a promise  to reduce tuition at both public 
and private institutions. In late 2010 and 2011, a protest movement began in order to force the 
President  to  honour  his  commitment.  This  culminated  in  June  2011  when  the  President 
announced that tuition would be reduced. However, as of late 2013, no move had been made to 
implement the promise. 

Other Student Costs  

Since  2005,  the  Korean  Education  and  Employment  Panel  has  run  an  annual  survey  on  living 
expenses.  The  results  of  this  survey  are  shown  below.  Since  2006  the  survey  has  separately 
asked questions about accommodation costs for the roughly 30% of students who indicated they 
move away from home. On the whole, these findings seem to indicate that student non-education 
costs are rising. 

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Table 4.1 – Living costs in constant 2011 won 

Books & other 
learning 
materials 

Accommodation 
costs – living 
away from home 
only (monthly) 

All other living 
costs (monthly) 

Total if living 
away from 
home (annual) 

Total if living 
at home 

2005 

2006 

2007 

2008 

2009 

2010 

419,987 

328,407 

419,434 

409,217 

389,724 

250,354 

287,024 

314,666 

319,663 

343,908 

365,767 

n/a 

2,002,829 

5,656,090 

2,296,190 

5,144,583 

2,517,325 

5,912,774 

2,557,300 

6,025,003 

2,751,267 

6,058,128 

2,926,137 

14,197 

Note: From 2005-2009, the ‘books’ category was included in ‘living costs’. 
Source: KEEP (Korean Education and Employment Panel)100. 

Study aid 

Grants 

Figure 4.2 shows the evolution of government scholarship and grant programmes over the past 
twenty years (scholarships from universities themselves and any other entities such as employers 
are excluded from these figures). As can clearly be seen, there has been an increase both in the 
number of grants given out and in their size. The number of grants (solid line, measured on the 
left axis) were still below 100,000 (or about 4% of the student body) as late as 2001. Since then, 
they  have  become  much  more  plentiful,  doubling  to  200,000  by  2007  and  doubling  again  to 
400,000, or nearly 18% of the student body in 2011. The size of the grants also increased, nearly 
tripling from 500,000 won to 1,400,000 won over the two decades. 

100 Available at http://www.krivet.re.kr/ku/ha/prg_kuFGADs.jsp (13.10.2013). 

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Figure 4.2: Grant recipients and average amounts (1991-2011) 

450 000

400 000

350 000

300 000

250 000

200 000

150 000

100 000

50 000

0

 1 800 000

 1 600 000

 1 400 000

 1 200 000

 1 000 000

 800 000

 600 000

 400 000

 200 000

 -

1
9
9
1

2
9
9
1

3
9
9
1

4
9
9
1

5
9
9
1

6
9
9
1

7
9
9
1

8
9
9
1

9
9
9
1

0
0
0
2

1
0
0
2

2
0
0
2

3
0
0
2

4
0
0
2

5
0
0
2

6
0
0
2

7
0
0
2

8
0
0
2

9
0
0
2

0
1
0
2

1
1
0
2

Recipients (left-side)

Average Grant (right side)

Source: Country Index.101 

Loans 

Loans,  too, have  increased  significantly  since  centralised  records became available  in 1999,  as 
shown in Figure 4.3. While Korea has had student loans since the early 1960s, until 1985 they 
functioned  mostly  on  the  same  terms  as  scholarships  –  that  is,  available  only  to  students  with 
very  high  records  of  achievement.  In  1985,  they  were  made  more  widely  available  based  on 
need,  although  this  was  financially  possible  only  by  removing  the  full  interest  subsidy  and 
requiring students to pay some of the interest themselves. But still, the numbers were relatively 
limited. It was only after 1997, the Asian currency crisis and the election of President Kim Dae-
jung, that the expansion of loans became a real priority. After that, loans to university students 
skyrocketed  in  number,  from  just  over  100,000  in  1999  to  750,000  in  2011.  The  size  of  the 
average loan increased as well, though not as quickly, with average loans rising from 2,500,000 
won in 1999 to 4,000,000 won in 2008 before falling back slightly to 3,700,000 won in 2011. 

101 Available at http://www.index.go.kr/ 

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Figure 4.3: Loans recipients and average amounts (1991-2011) 

900 000

800 000

700 000

600 000

500 000

400 000

300 000

200 000

100 000

0

₩4 500 000 

₩4 000 000 

₩3 500 000 

₩3 000 000 

₩2 500 000 

₩2 000 000 

₩1 500 000 

₩1 000 000 

₩500 000 

₩0 

9
9
9
1

0
0
0
2

1
0
0
2

2
0
0
2

3
0
0
2

4
0
0
2

5
0
0
2

6
0
0
2

7
0
0
2

8
0
0
2

9
0
0
2

0
1
0
2

1
1
0
2

Recipients (left axis)

Average Loan (right axis)

Source: Country Index. 

Tax Expenditures 

In  addition  to  loans  and  grants,  there  is  also  a  relatively  generous  system  of  tax  support  for 
families  with  children  in  higher  education.  Families  may  deduct  tuition  payments  from  their 
taxes, up to an annual maximum of 9,000,000 won. Because Korea has a progressive income tax 
system  where  higher-income  individuals  pay  a  greater  percentage  of  marginal  income  in  tax, 
these  expenditures  are  quite  regressive.  As  a  2006  OECD  report  noted,  the  value  of  these 
deductions  are  not  tracked  on  a  systemic  basis  (the  2012  National  Assembly  Budget  Office 
report on tax credits puts the figure for expenditures in 2011 at 19 trillion  won, but this figure 
seems to include the value of deductions for primary and secondary education as well).  

Within the scope of this report, it is impossible to impute the value of these credits. The reader 
should  simply  be  aware  that  whatever  amount  of  aid  is  given  through  loans  and  grants  is 
substantially augmented in practice by large and fairly regressive tax subsidies which cannot be 
measured here.  

Net Costs  

Using this information a summary of how the net costs to students have changed over time can 
be portrayed. Figure 4.4 shows how net costs have evolved for the 25% of students in the public 
system.  Fees,  as  we  saw  in  Figure  4.1,  have  increased  substantially  over  time.  Grants  and 
scholarships, because they are not very large and are not distributed to very many students, have 
only  a  very  small  impact  on  net  prices.  However,  the  expansion  of  the  loan  programme  since 
1999  has  actually  had  very  important  effects  on  affordability.  In  effect  this  growth  has 
completely negated the growth in fees over the past decade, so that families on average are not 
paying any more out of pocket than they were at the time of the Asian currency crisis. 

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Figure 4.4: Net costs in won, public universities (1991-2011) 

5 000 000
4 500 000
4 000 000
3 500 000
3 000 000
2 500 000
2 000 000
1 500 000
1 000 000
500 000
0

1
9
9
1

2
9
9
1

3
9
9
1

4
9
9
1

5
9
9
1

6
9
9
1

7
9
9
1

8
9
9
1

9
9
9
1

0
0
0
2

1
0
0
2

2
0
0
2

3
0
0
2

4
0
0
2

5
0
0
2

6
0
0
2

7
0
0
2

8
0
0
2

9
0
0
2

0
1
0
2

1
1
0
2

Fees

Net fees

Net fees minus loans

Note: Net student fees is student fees minus grants. Constant Prices (2011).  
Source: Country Index; Ministry of Education. 

Figure 4.5 shows that a similar story is true among private universities. The absolute increase in 
fees  since  1999  was  slightly  smaller  in  private  universities  than  in  public  ones,  and  as  in  the 
previous  graph  we  see  that  scholarships  and  grants  made  almost  no  difference  to  net  fees.  In 
terms  of  out-of-pocket  costs  –  that is,  net  costs after  loans  in 2011  were  roughly  equal  in  real 
terms to where they were in 1997. 

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Figure 4.5: Net costs in won, private universities (1991-2011) 

9 000 000

8 000 000

7 000 000

6 000 000

5 000 000

4 000 000

3 000 000

2 000 000

1 000 000

0

1
9
9
1

2
9
9
1

3
9
9
1

4
9
9
1

5
9
9
1

6
9
9
1

7
9
9
1

8
9
9
1

9
9
9
1

0
0
0
2

1
0
0
2

2
0
0
2

3
0
0
2

4
0
0
2

5
0
0
2

6
0
0
2

7
0
0
2

8
0
0
2

9
0
0
2

0
1
0
2

1
1
0
2

Fees

Net fees

Net fees minus loans

Note: Net student fees is student fees minus grants. Constant Prices (2011). 
Source: Country Index; Ministry of Education. 

Relative Earnings 

A final issue of note here is the attractiveness of higher education as an investment. As Figure 
4.6 shows, higher education has become an increasingly advantageous investment for most of the 
last decade, right up until the financial crisis, at which point the earnings premium for graduates 
fell rapidly. The reason for the fall is relatively easy to explain: graduate permanent employment 
fell very rapidly in the wake of the crisis, as shown in Figure 4.7. 

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Figure 4.6: Higher education graduate incomes relative to secondary school 
completers’ income (2001-2011) 

160

155

150

145

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135

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Note: Indexed to the earnings of secondary school graduates (=100). 
Source: Korean Education Statistics Service.  

Figure 4.7: Permanent employment rate two years after graduation, university 
and non-university HEI graduates (1991-2010) 

90

80

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60

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Universities

Non-Universities

Note:  The  graph  shows  permanent  employment  only;  employment  that  does  not  include  health  benefits  is  not 
considered permanent and is not captured in this figure. 
Source: Korean Education Statistics Service. 

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It  is  quite  typical  that  graduates  of  shorter  programmes  have  higher  rates  of  permanent102 
employment than university graduates; the latter have a number of reasons not to be in the labour 
force, including graduate school and in some cases military service. But what is very clear from 
Figure 4.7 is that the effects of the recent downturn on graduates’ employment rates were even 
more  severe  than  that  of  the  Asian  financial  crisis  of  1997.  Since  the  graph  is  portraying 
permanent employment, the big drop in 2010 does not mean a big fall in all  employment, just 
permanent hiring, probably a normal response in a recession. None the less, the recession had a 
negative  effect  on  earning  premiums  and  may  also  account  for  institutions’  reluctance  to  raise 
fees after 2009. 

4.2  Participation Rates  

A key question – perhaps the key question of this study – is whether or not the change in cost-
sharing and fees had any effect on participation. Figure 4.8 suggests strongly that they did not. 
The heavy line represents participation rates (right-axis), which tripled from 15% to 45%. This 
occurred at the same time as tuition (left-axis) doubled. True, the introduction of loans and the 
moderation of net fees after loans post-2000 may have helped. But even prior to the introduction 
of loans, participation still doubled from 15% to 30%. 

Figure 4.8: Participation vs. various cost indices (1991-2011) 

50%
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%

10 000 000
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Fees

Net Fees

Net fees After Loans

Participation

Source: Country Index; Ministry of Education; Korean Education Statistics Service. 

102 Employment that does not include health benefits is not considered permanent and is not captured. 

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4.3  Composition of the Student Body  

Ethnicity  

In many countries, a prime concern about raising fees is the effect that this might have on ethnic 
minorities,  which  are  frequently  socio-economically  disadvantaged.  However,  because  of  the 
degree of homogeneity in the population, differences by ethnicity are not an issue in Korea. 

Gender 

The proportion of the university student body that is female increased gradually throughout the 
period for which we have data. In 1998, 42% of university students were female; by 2010, this 
figure  had  risen  to  48%. Because  this  change  happened in  a  relatively  steady  manner,  there  is 
little to suggest that the pace of change was much affected by any changes in fees. 

Figure 4.9: Females as a percentage of the university student body (1998-2011) 

50%

45%

40%

35%

30%

8
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Source: Korean Education Statistics Service. 

Socio-economic status 

The  effect  of  socio-economic  status  on  access  to  higher  education  is  a  topic  that  has  been  the 
subject  of  some  academic  investigation,  but  which  has  not  been  the  subject  of  consistent 
statistical investigation. In other words, we know that socio-economic status matters a great deal, 
but we do not have enough time-series data to see how it might have changed over time. 

Park (2007) used data from the Korean Labour and Income Panel Study (KLIPS) to look at the 
relationship between parental education and access over time and  noted that parental education 
actually  seemed  to  have  a  greater  influence  on  who  managed  to  access  education in  the 1990s 
than  in previous decades.  In  a  similar  vein,  OECD  (2006)  noted  that class  played  a  very  large 

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role in stratification within higher education; nearly 75% of students at top-level institutions were 
from  what  were  termed  the  ‘upper’  and  ‘upper-middle’  classes;  that  same  group  made  up  just 
1.1% of enrolments at the lowest status institutions. 

However,  it  is  far  from  clear  that  fees  have  much  to  do  with  this.  Most  observers  suggest  the 
cause  is  the  country’s  system  of  university  exams,  which  –  as  is  the  case  in  many  Confucian 
countries  -  are  highly  tilted  towards  a  set  of  high-stakes  exams  taken  at  the  end  of  secondary 
school. These have spawned a massive tutoring industry which at times the central government 
has  tried  to  ban  because  they  were  seen  as  giving  an  advantage  to  students  with  wealthier 
parents.  

4.4  Completion Rates  

There do not appear to be any studies on the subject of attrition or time to completion because it 
is  a  generally  accepted  convention  that  virtually  all  students  who  start  university  complete  it. 
However, the OECD’s 2006 country review noted that there were in fact little data available to 
buttress this argument and that the data they saw suggested that completion rates might be as low 
as 77%. Unfortunately, it appears that there have been no follow-up studies to shed more light on 
this subject. 

4.5  Evaluation 

The evaluation consists of answering four separate sets of questions.  

First,  how  have  increases  in  private  funding  changed  costs  to  students?  The  answer  here  is 
straightforward. Over the two decades of our period, fees roughly doubled in real terms in both 
the  public  and private  sectors.  The  government  did  make  attempts  to  reduce  net  costs  through 
increasing scholarships, but these were relatively small. More important was the sharp increase 
in  loans,  which  in  effect  covered  most  of  the  increase  in  costs  after  1999.  Net  costs  and  debt 
increased  substantially  –  the  amount  South  Koreans  had  to  pay  out  of  pocket  for  their  higher 
education changed very little. 

The  second  question  here  is:  what  effect  does  an  increase  in  private  funding  have  on 
participation  rates?  The  answer  here,  seemingly,  is  a  positive  one.  Real  fees  doubled; 
participation tripled. Since most of the increase occurred in private higher education, increased 
government  funding  cannot  have  played  a  role;  quite  simply,  private  institutions  which  were 
allowed to charge what the market would bear increased their fees and ploughed them back into 
their  operations  in  order  to  meet  burgeoning  demand.  There  is  no  other  possible  explanation 
here. 

A  third  question  is  “how  have  increases  in  private  funding  affected  the  composition  of  the 
student body”? This is not a question which can be answered well due to a scarcity of data. We 
know  that  the  Korean  higher  education  system  is  highly  stratified  socially,  but  there  is  no 

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evidence  which  would  suggest  that  tuition is  a cause.  We  know  that  female  participation  rates 
have grown faster than male ones since 1998. 

Finally, the Korean system does not systematically capture data on student success, so there is no 
data on which to base any conclusions with respect to time-to-completion. 

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5.  HYPOTHESIS D: INCREASING PRIVATE FUNDING 
AFFECTS STUDENT CHOICE OF HOW OR WHAT TO 
STUDY 

This  chapter  looks  at  data  relevant  to  Hypothesis  D,  which  states  that  as  private  funding 
increases,  costs  increase  to  students  and  their  families,  which  in  turn  will  have  an  impact  on 
students’ choice of how and what to study (but not necessarily on the share of students studying). 
Accordingly, this section looks at these topics: have student age, location or field of study and 
time to completion changed over time in relation to cost-sharing? 

5.1  Student Study Patterns  

As noted earlier, Korea only records students as studying full-time, so this is not an issue that can 
be addressed. 

5.2  Location of Study  

One  hypothesis  about  the  effects  of  tuition  is  that  they  make  it  more  difficult  for  students  to 
study away from home. As costs rise, so the theory goes, less money is available for other living 
costs and so students become more likely to stay at home in order to economise.  

Geography has been a major aspect of policy in higher education. Korea is a highly centralised 
country,  with  both  the  country’s  financial  and  government  centres  being  located in  Seoul.  The 
government  has  made  considerable  effort  to  ensure  that  quality  public  higher  education  is 
available  in  all  parts  of  the  country.  It  has  also  recently  tried  to  limit  the  number  of  students 
studying  in  the  capital  by  placing  a  moratorium  on  new  HEIs  opening  undergraduate 
programmes in the capital. If this has been a major policy pre-occupation, we can conclude at the 
least that the phenomenon of students travelling from outside Seoul to the capital has not been 
perceived to have in any way been abated by higher fees. 

As far as quantitative data go, there are only data from 2005 onwards on whether students study 
away from home. These data consistently show that roughly 30% of students are in this position. 

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5.3  Field of Study  

One hypothesis that is frequently advanced about the impact of fees is that to the extent that fees 
vary  across  fields  of  study,  they  may  induce  students  to  move  towards  ‘cheaper’  subjects  and 
away from (potentially) more valuable subjects that happen to be more expensive.  

As noted earlier in Chapter 3, there have been no notable changes in the distribution of students 
by  field  of  study.  As  a  result,  there  does  not  appear  to  be  any  reason  to  believe  that  fees  are 
driving any change in this area. 

5.4  Time-to-Completion  

As noted earlier, there is no data available with which to answer this question. 

5.5  Evaluation 

Hypothesis D suggested that rather than having an absolute effect on the level of participation, 
the  liquidity  issues  that  stem  from  increased  tuition  levels  may  lead  to  students  switching  to  a 
different  mode  of  delivery  that  enables  them  to  study  whilst  working  and  earning  income,  or 
delay  participation  to  work  to  save  money  before  entering  higher  education.  Specifically,  four 
sub-hypotheses about the potential impact of higher tuition were elaborated, which will now be 
examined:  

First,  with  respect  to  ‘how’  students study,  we  have  noted  that  Korea  only  records  students  as 
being full-time. If this is accurate, then there cannot have been a change.  

Second,  with  respect  to  whether  increases  in  private  funding  have  affected  students’  choice  of 
study location either in terms of where within a country they choose to study or whether it has 
affected  plans  to  study  internationally,  there  is  little  direct  evidence  on  the  question  and  what 
there  is  suggests  no  change  in  mobility.  Moreover,  the  Government’s  moratorium  on  new 
undergraduate programmes in the capital suggests that the perception is that there has been no 
reduction in the flow of students to the capital. 

Third, with respect to whether increases in tuition have affected what students study, as we noted 
earlier, there does not appear to have been many significant changes in the main fields of study 
enrolment over our period, so it is difficult to conclude that tuition has caused any changes.  

Fourth, with respect to increases in fees making students more efficient and taking less time to 
complete their education, there are no data available on which to test this proposition.  

In sum, though the data are admittedly limited, the increase in tuition fees in Korea appears not 
to have had any adverse effects on study mode, study timing or choice of field of study.  

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6. 

CONCLUSION 

With respect to Hypothesis A, we can say that cost-sharing most certainly increased total funding 
to higher education.  

With respect to Hypothesis B, it is difficult to say that much has changed in Korea as a result of 
policy changes in our period of interest, partly because of a lack of data but also partly because 
of a lack of policy changes. To the extent that there are data, there does not appear to be much 
change in strategy, though the increased emphasis on international students at the same time as 
domestic  enrolments  began  to  flag  is  certainly  evidence  that  institutions  remain  revenue-
maximising. 

With  respect  to  Hypothesis  C,  the  evidence  is  very  strong  that  higher  fees,  far  from  limiting 
participation, in fact abetted its growth. Most students are enrolled in private institutions, which 
can  only  increase  capacity  if  they  are  receiving  sufficient  tuition  funding  money  to  expand. 
Government  funding  can  take no  credit  for  the  expansion  of  this  sector. As  for  changes  in  the 
composition of enrolment, there is little data on which to base a conclusion one way or the other. 

Finally, with respect to Hypothesis D, though the data are admittedly limited, the rise in tuition 
fees in Korea appear not to have had an adverse effects on study mode, study timing or choice of 
field of study.  

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REFERENCES 

Kim, A., & Young Lee. (2003). Student Loan Schemes in the Republic of Korea: Review and 

Recommendations, Policy Research and Dialogue, Student Loan Schemes in Asia (No. Vol. 
1, No. 4) (Vol. 1). Bangkok: UNESCO Asia and Pacific Regional Bureau for Education. 

Seth, M. (2002). Education Fever: Society, Politics, and the Pursuit of Schooling in South 

Korea. Honolulu: University of Hawai Press. 

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POLAND 

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ACKNOWLEDGEMENTS 

The authors would like to acknowledge the support in data research and interpretation provided 
by Cezary Kościelniak, Ph.D. (Tenure adjunct, Institute of Culture Studies / Center for Public Policy, 
Department of Social Sciences, Adam Mickiewicz University). 

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1.  INTRODUCTION 

1.1  Overview of Higher Education in Poland  

Poland has a population of about 38.5 million people. The Polish higher education consists of 1.7 
million students, studying in roughly 450 institutions. Up until 1990, all institutions but one were 
state-run (the other being the Catholic University of  Lublin). In September 1990, however, the 
Sejm passed an Act concerning ’non-state’ higher education which allowed the establishment of 
private institutions. These then flourished and quickly came to outnumber the state universities 
(see Section 1.4, below). 

Education in Poland is compulsory until age 16 and completion of lower secondary (gimnazjum). 
Upper secondary schools are not compulsory, but are nonetheless attended by the vast majority 
of the population in the age group 16-19 years. There are a number of possible pathways after 
lower secondary. The ones that lead most directly to university are the lyceum, but technical and 
vocational  options  are  also  available.  After  the  completion  of  any  of  these  pathways,  students 
may take what is known as the ‘maturity’ examination and receive a secondary school leaving 
certificate. Results on the maturity examination also determine eligibility for entrance to higher 
education.  Those  who  achieve  the  best  results  are  permitted  to  enrol  in  full-time  programmes 
(which are fully subsidised), while other candidates who passed the exam but were ranked lower 
in the list are offered places in other types of degree programmes, for which tuition is charged. In 
some fields of study, winners and finalists of national competitions in a given school subject can 
be offered places irrespective of final examination results. This system of maturity examinations 
is still relatively new; prior to 2006, each higher education institution (HEI) had its own entrance 
examination. 

The  education  system  in  Poland  is  centrally  managed  by  the  Ministry  of  Science  and  Higher 
Education  (though  this  is  a  new  ministry;  prior  to  2005  the  Ministry  of  Education  was 
responsible  for  higher  education  in addition to  primary  and  secondary).  However,  the  ministry 
delegates  a  number  of  its  powers  with  respect  to  specialised  HEIs  to  a  number  of  other 
ministries: the Minister of National Defence for military HEIs, the Minister for Internal Affairs 
for  government  service  HEIs,  The  Minister  for  Culture  for  HEIs  for  art  studies,  the  Health 
Minister  for  medical  HEIs  and  the  Minister  responsible  for  Marine  Economy  for  HEIs  for 
maritime studies.  

Tuition  in  public  universities  is  nominally  free  (though  all  students  pay  a  fairly  nominal  180 
zloty/year – equals 43 euros - in various types of administrative fees). However, Poland has what 
is known as a ‘dual-track’ system in its public sector in that while some of its students have state-
funded places, a substantial portion of students – those who did not meet the necessary standards 
in their secondary-school matriculation exams and have sufficient financial resources - do in fact 
pay fees. In addition, Poland’s substantial private sector is nearly entirely funded through tuition 
fees. 

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1.2  Key Higher Education Stakeholders 

In addition to the Ministry of Science and Higher Education, there are a number of key actors in 
the higher education system.  

The State Accreditation Committee (SAC), advises the Minister with respect to the establishment 
of  HEIs  and  authorisations  to  be  granted  to  them  to  provide  degree  programmes  in  a  specific 
field and at a specific level  of study.  It is also responsible for the assessment of the quality of 
degree programmes.  

The SAC is not the only body with a quality control function; another key central agency is the 
Central Commission for Academic Degrees and Titles at the Office of the Prime Minister, which 
grants  authorisations  to  award  doctoral  degrees.  The  Commission  also  defines  areas  and 
disciplines of science and fine arts in which academic degrees and the academic title of professor 
can be awarded  

Organisations  representing  the  academic  community  include:  The  Conference  of  Rectors  of 
Academic Schools in Poland (a representative body of public universities) and the Conference of 
Rectors  of  Non-University  HEIs  in  Poland  (an  analogous  body  for  private  HEIs).  A  Students’ 
Parliament  is  made  up  of  representatives  of  student  organisations  from  individual  HEIs.  The 
Parliament has the right to be consulted on draft legislation concerning students and to present 
proposals concerning student matters. There is also a General Council for Higher Education, an 
elected body representing the academic community, which co-operates with the Minister in all 
matters relating to higher education.  

1.3  How Government Funds Institutions 

Roughly two-thirds of public institutions’ budgets come from government subsidies. These are 
divided into several funding envelopes, with the two largest being teaching (82%) and research 
(14%).  Universities  are  also  provided  with  a  budget  from  which  they  can  provide  financial 
assistance to students (including dormitory subsidies). Since 2001, private institutions have also 
been  eligible  for  state  funding  for  research  and  student  support,  but  not  teaching.  Universities 
have  a  substantial  amount  of  autonomy  in  terms  of  how  they  budget  and  how  they  manage 
finances from year to year.  

Between 1993 and 2001, the Ministry of Education divided the teaching subsidy on the basis of 
an algorithm that for the most part was based on a combination of current year student numbers, 
current  year  academic  staff numbers and  the  previous  year’s  allocation. Both  staff  and  student 
numbers were weighted; the former according to the level of qualifications of the teaching staff 
and  the  latter  by  faculty,  with  higher  cost  subjects  receiving  higher  amounts  of  subsidy.  This 
algorithm  was  a  contributing  factor  in  the  growth  of  the  number  of  students  as  it  rewarded 
institutions that grew at a rapid rate. In 2001, a new set of rules were adopted. The main effect of 
these rules was to increase the size of the subsidy to institutions (mainly to increase salaries so as 

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to improve quality and reduce the practice of public university professors taking up a second job 
at  private  institutions);  the  only  substantial  change  to  the  formula  was  to  make  a  very  small 
amount of money available to award academic units that have been rated highly by SAC in its 
regular reviews. 

Research funding is distributed in a number of ways. All public institutions receive at least some 
money  via  the  funding  formula;  in  addition,  substantial  sums  are  awarded  to  researchers  on  a 
competitive  basis.  The  formula  funding  is  awarded  partly  on  the  basis  of  staff  size  and 
qualifications, but is partially performance-based as well, with performance indicators including 
peer-reviewed publications, patents awarded, monographs and textbooks produced. Since 2004, 
the government has introduced a number of research funding lines which reward institutions that 
have been able to find industry sponsorship. 

1.4  History of Cost-Sharing 

Article 70 of the Constitution of the Republic of Poland guarantees that public higher education 
is  free;  however,  tuition  fees  still  make  up  a  fairly  important  portion  of  higher  education 
financing in Poland. Fees play a role in two ways. 

The  first  is  in  private  higher  education  (in  Poland,  the  term  for  this  is  technically  ‘non-state 
education’  but  to  preserve  continuity  across  national  reports  we  will  here  refer  to  this  as 
‘private’). A private sector was established in Polish higher education very quickly after the end 
of  the  socialist  period,  with  the  first  law  being  passed  in  September  1990.  As  in  many  other 
former socialist countries, the private sector ended up concentrating particularly in areas such as 
law,  economics  (a  term  which  can  also  encompass  areas  known  as  ‘business’  or  ‘commerce’) 
and  other  social  science-related  fields  of  study.  Partly,  as  in  all  countries  with  a  significant 
private sector in education, this was because these areas of study were less capital-intensive and 
thus had lower barriers to entry for  new institutions. But partly, also, it was due to the special 
conditions  that  existed  in  former  socialist  countries  in  the  early  1990s;  namely,  that  it  was 
precisely in social sciences where older (and more prestigious) universities had the least prestige, 
since their curricula were so infused with Marxist-Leninist thinking which was ill-suited to the 
new market economy. As we shall see in more detail later in this paper, the private sector grew to 
be one of the largest in Europe, with over 300 private institutions and over 600,000 students, a 
third of the national total. 

The  other  way  that  cost-sharing  has  taken  effect  has  been  through  tuition  fees  at  public 
institutions. Students taking full-time studies in the Polish language attend free of charge (though 
they  may  be  charged  fees  for  entrance  exams  and  other  administrative  processes).  However, 
students  taking  continuing  education  courses,  studying  part-time,  retaking  a  class  because  of 
poor performance, or taking courses in a foreign language may all be charged fees. The level of 
such  fees  is  determined  by  the  rector  of  each  higher  education  institution  and  within  a  single 
institution  fees  can  vary  significantly  from  one  programme  to  another.  Poland  is  thus  a  prime 
example  of  what  some  scholars  term  a  ‘dual-track’  tuition  policy  (free  for  some,  not  free  for 
others). 

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These policy changes all happened very soon after the move away from socialism in the 1990s, 
before the start of the period under examination in this report. Unfortunately, statistics from these 
years are scant. Few statistics, in fact, are available prior to 1994, by which time fees had already 
risen to levels close to what they are today. As a result what is under examination in this paper is 
what  has  occurred  with  a  relatively  steady-state  cost-sharing  regime  that  involves  both  a 
significant  private  education  sector  and  a  dual-track  policy  in  public  institutions  involving 
significant fees for some. 

1.5  History of Enrolment  

The Polish higher education system increased enormously in size over our period. In 1994, when 
centralised  statistics  began  to  be  collected  again,  the  size  of  the  entire  system  was  just  over 
650,000 students. By the time enrolment peaked in 2007, the system had tripled in size to just 
over  1.9  million  students.  Some  of  this  was  due  to  an  improvement  in  participation  rates  (see 
Figure  1.2,  below),  but  to  a  large  extent  this  was  a  case  of  a  system  having  to  meet  deferred 
demand.  In  Poland,  as  in  many  of  the  former  socialist  countries,  opportunities  for  higher 
education  were  limited;  when  the  transition  to  democracy  and  a  market  economy  came,  many 
who had previously not been able to attend higher education immediately after leaving secondary 
school chose to do so.  

Figure  1.1  shows  the  changes  in  enrolment  from  1994  to  2011.  Growth  was  continuous  and 
extremely  rapid  in  the  period  1994  to  2000,  during  which  enrolments  tripled  from  650,000  to 
1.94 million. Moreover, growth was balanced between the two sectors, with roughly half the new 
enrolments going to the private sector and half going to the public sector. Of course, these two 
systems  were  starting  from  very  different  bases;  an  increase  of  600,000  in  the  public  sector 
implied a doubling of enrolments. In the private sector it meant roughly a fifteen-fold increase. 

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Figure 1.1: Enrolment in public and private institutions (1994-2011) 

 2 500 000

 2 000 000

 1 500 000

 1 000 000

 500 000

 -

4
9
9
1

5
9
9
1

6
9
9
1

7
9
9
1

8
9
9
1

9
9
9
1

0
0
0
2
Public

1
0
0
2

2
0
0
2

3
0
0
2
Private

4
0
0
2

5
0
0
2

6
0
0
2
Total

7
0
0
2

8
0
0
2

9
0
0
2

0
1
0
2

1
1
0
2

Source: Pre-1996, Finanse Szkół Wyższych; Post-1996, ‘Szkoły wyższe i ich finance’. 

Within the public sector, growth can be examined both by status (full-time vs. part-time) and by 
type  of  institution.  ‘Universities’  in Poland  are  not  very  numerous  – just  11  at  the  start  of  our 
period and 19 at the end of it. There are what we might term ‘classic’ HEIs (i.e. comprehensive 
and  with  a  strong  emphasis  on  research),  though  in  fact  only  three  of  them  –  Jagiellonian, 
Wrocław and Warsaw – were founded before 1945. ‘Non-university tertiary institutions’ include 
a number of institutions which bear the name ‘university’ but are not comprehensive (technical 
universities, universities of life sciences, etc.) as well as a number of technical institutes, military 
and police academies and schools devoted to various Fine Arts. 

Figure  1.2  shows  that  until  around  2005,  enrolment  in  both  public  universities  and  non-
universities  were  increasing  at  relatively  similar  paces.  This  is  somewhat  deceptive  as  a 
substantial  part  of  the  increase  in  university  numbers  came  from  institutions  changing 
classification, but nevertheless the overall pattern holds. For the five following years, however, 
full-time enrolment held level or increased slightly, but part-time enrolment started to decrease 
significantly.  As  shown  in  Figure  1.3,  a  somewhat  similar  pattern  can  be  seen  in  private 
universities as well in that enrolments started to decline from about 2005. The difference is that 
in the private universities, both full-time and part-time enrolments were affected. 

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Figure 1.2: Full- and part-time enrolment at public institutions (1994- 2011)  

600 000

500 000

400 000

300 000

200 000

100 000

0

4
9
9
1

5
9
9
1

6
9
9
1

7
9
9
1

8
9
9
1

9
9
9
1

0
0
0
2

1
0
0
2

2
0
0
2

3
0
0
2

4
0
0
2

5
0
0
2

6
0
0
2

7
0
0
2

8
0
0
2

9
0
0
2

0
1
0
2

1
1
0
2

FT Universities

PT Universities

FT non-universities

PT non-universities

Source: Pre-1996, Finanse Szkół Wyższych; Post-1996, ‘Szkoły wyższe i ich finance’. 

Figure 1.3: Full- and part-time enrolment at private institutions (1994-2011)  

600 000

500 000

400 000

300 000

200 000

100 000

0

4
9
9
1

5
9
9
1

6
9
9
1

7
9
9
1

8
9
9
1

9
9
9
1

0
0
0
2

1
0
0
2

2
0
0
2

3
0
0
2

4
0
0
2

5
0
0
2

6
0
0
2

7
0
0
2

8
0
0
2

9
0
0
2

0
1
0
2

1
1
0
2

Source: Pre-1996, Finanse Szkół Wyższych; Post-1996, ‘Szkoły wyższe i ich finance’. 

FT Private

PT Private

Although enrolments began to fall significantly in the latter half of the last decade, participation 
rates did not follow suit. Figure 1.4, below shows participation rates for the ‘best four years,’ that 
is,  the  four  years  with  the  highest  participation,  19  to  22  year  olds.  The  ’best  four  years’ 
participation rates are only available for the period from 2007 onwards because data on the age 
of students was not collected until that time. However, the years for which they are available are 
important because they coincide with the years when enrolments began to fall. The data shows 
clearly  that  youth  participation  rates  stayed  quite  stable  over  this  period;  the  main  reason  for 

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declining enrolments was a fall in participation from students in their mid-20s (which may reflect 
a faster completion rate). 

Figure 1.4: Participation rates of the ‘best four years’ (2007-2011) 

50%

40%

30%

20%

10%

0%

7
0
0
2

8
0
0
2

9
0
0
2

0
1
0
2

1
1
0
2

University Participation Rate

Non-University Paticipation rate

Total Participation rates

Note: Best four years are the years with the highest participation: 19 to 22. 
Source: Pre-1996, Finanse Szkół Wyższych; Post-1996, ‘Szkoły wyższe i ich finance’. 

What the foregoing four figures show is the unwinding of ‘deferred demand’ phenomenon. From 
1990  to  2005,  demand  for  higher  education  soared  because  of  older  students  who  had  been 
denied  study  opportunities  under  the  previous  regime.  By  and  large,  these  students  were  not 
given free places, which tended to go to students arriving directly from secondary school. As a 
result,  they  ended  up  paying  for  their  education,  either  in  the  private  or  the  part-time  public 
sectors. As this clientele is now drying up, the total number of fee-paying students – and hence 
private revenue, is now falling in Poland. 

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2.  HYPOTHESIS A: AS PRIVATE FUNDING INCREASES, 

INSTITUTIONAL REVENUE INCREASES  

This  chapter  looks  at  data  relevant  to  Hypothesis  A,  which  states  that  as  private  funding 
increases,  institutional  revenue  increases,  but  only  if  public  funding  remains  constant.  That 
means that it will examine whether: 

 
 
 

there has been an increase in private funding 
there has been a concurrent change to public funding 
there has been a total increase in funding and how this is related to changes in private and 
public revenues. 

Changes  in institutional  funding  will  be  considered  both  in  terms  of  total  institutional  revenue 
and relative to the number of students. 

2.1  Changes in Institutional Revenues over Time 

At the end of the socialist period in 1990, higher education was 100% funded by the state. The 
arrival  of  private  universities  in  1990-91  and  the  subsequent  introduction  of  fee-payable  part-
time studies in public institutions meant that the higher education sector increasingly looked to 
private funding to maintain itself. As Figure 2.1 shows, by 2003, the proportion of funds from 
private  sources,  which  in  Poland  mean  mainly  tuition  fees,  reached as high  as 35%.  However, 
after that, the proportion began to fall again until, by 2011, it was a shade under 25%. 

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Figure 2.1: Percentage of higher education funding from private sources (1995-
2011) 

40%

35%

30%

25%

20%

15%

10%

5%

0%

5
9
9
1

6
9
9
1

7
9
9
1

8
9
9
1

9
9
9
1

0
0
0
2

1
0
0
2

2
0
0
2

3
0
0
2

4
0
0
2

5
0
0
2

6
0
0
2

7
0
0
2

8
0
0
2

9
0
0
2

0
1
0
2

1
1
0
2

Source: Pre-1996, Finanse Szkół Wyższych; Post-1996, ‘Szkoły wyższe i ich finance’. 

It  is  important  to  recognise  that  the  decrease  in  the  percentage  of  funds  coming  from  private 
sources does not stem from an absolute reduction in the amount of private funds. Income from 
private  sources  remained  more  or  less  unchanged in  constant  terms between  2003  and  2010  at 
between  4.7 and 4.9  billion  zloty.  What  changed  was  public  investment,  which  rose  by  nearly 
58% in constant terms over the same period, from 9 billion to 14 billion zloty. 

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Figure 2.2: Total funding to institutions by source, in thousands of zloty (1995-
2011) 

20 000 000

15 000 000

10 000 000

5 000 000

5
9
9
1

6
9
9
1

7
9
9
1

8
9
9
1

9
9
9
1

0
0
0
2

1
0
0
2

2
0
0
2

3
0
0
2

4
0
0
2

5
0
0
2

6
0
0
2

7
0
0
2

8
0
0
2

9
0
0
2

0
1
0
2

1
1
0
2

Government

Students

Other Private

Note: Constant prices (2011). 
Source: Pre-1996, Finanse Szkół Wyższych; Post-1996, ‘Szkoły wyższe i ich finance’ 

A slightly different way of portraying this is shown in Figure 2.3, which graphs total funding by 
sector. The proportion of total funding going to the private university sector peaked in 2003 at 
17.3%.  This  was  up  significantly  from  just  4%  in  1995,  and  of  course  was  entirely  due  to  the 
enormous  increase  in  fee-paying  students  the  private  sector  was  enrolling.  After  2003,  fee 
income  to  private  institutions  continued  to  increase  in  real  terms,  but  more  slowly  than  the 
increase  in  income  that  public  institutions  were  receiving,  mostly  from  public  sources.  As  a 
result,  by  2011,  the  funding  obtained  by  the  private  sector  had  fallen  back  somewhat  to  15%. 
Figures 2.4 and 2.5 show the same data, separately for public and private universities.  

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Figure 2.3: Total funding by sector, in thousands of zloty (1995-2011) 

25 000 000

20 000 000

15 000 000

10 000 000

5 000 000

0

5
9
9
1

6
9
9
1

7
9
9
1

8
9
9
1

9
9
9
1

0
0
0
2

1
0
0
2

2
0
0
2

3
0
0
2

4
0
0
2

5
0
0
2

6
0
0
2

7
0
0
2

8
0
0
2

9
0
0
2

0
1
0
2

1
1
0
2

Note: Constant prices (2011). 
Source: Pre-1996, Finanse Szkół Wyższych; Post-1996, ‘Szkoły wyższe i ich finance’. 

Public

Private

Figure 2.4: Total funding by source, public universities only, in thousands of 
zloty (1995-2011) 

18 000 000

16 000 000

14 000 000

12 000 000

10 000 000

8 000 000

6 000 000

4 000 000

2 000 000

0

5
9
9
1

6
9
9
1

7
9
9
1

8
9
9
1

9
9
9
1

0
0
0
2

1
0
0
2

2
0
0
2

3
0
0
2

4
0
0
2

5
0
0
2

6
0
0
2

7
0
0
2

8
0
0
2

9
0
0
2

0
1
0
2

1
1
0
2

Government

Students

Other Private

Note: Constant prices (2011). 
Source: Pre-1996, Finanse Szkół Wyższych; Post-1996, ‘Szkoły wyższe i ich finance’. 

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Figure 2.5: Total funding by source, private universities only, in thousands of 
zloty (1995-2011) 

3 500 000

3 000 000

2 500 000

2 000 000

1 500 000

1 000 000

500 000

0

5
9
9
1

6
9
9
1

7
9
9
1

8
9
9
1

9
9
9
1

0
0
0
2

1
0
0
2

2
0
0
2

3
0
0
2

4
0
0
2

5
0
0
2

6
0
0
2

7
0
0
2

8
0
0
2

9
0
0
2

0
1
0
2

1
1
0
2

Government

Students

Other Private

Note: Constant prices (2011). 
Source: Pre-1996, Finanse Szkół Wyższych; Post-1996, ’Szkoły wyższe i ich finance’. 

Another way of looking at investments in higher education is to look at spending as a percentage 
of GDP, which is portrayed in Figure 2.6. Between 1995 and 2003, both public expenditure and 
private expenditures expanded as a percentage of GDP; in 2003, student expenditures (fees) as a 
percentage  of  GDP  peaked  at  0.45%  and  started  to  decline  thereafter.  Public  expenditures  on 
institutions  peaked  two  years  later  at  1%  of  GDP  and  declined  thereafter.  As  of  2010,  higher 
education expenditures as a percentage of GDP were 0.93% from public sources and 0.34% from 
private ones. 

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Figure 2.6: Higher education funding by source, as a % of GDP (1995-2011) 

1,6%

1,4%

1,2%

1,0%

0,8%

0,6%

0,4%

0,2%

0,0%

5
9
9
1

6
9
9
1

7
9
9
1

8
9
9
1

9
9
9
1

0
0
0
2

1
0
0
2

2
0
0
2

3
0
0
2

4
0
0
2

5
0
0
2

6
0
0
2

7
0
0
2

8
0
0
2

9
0
0
2

0
1
0
2

1
1
0
2

Government

Students

Other Private

Source: Pre-1996, Finanse Szkół Wyższych; Post-1996, ‘Szkoły wyższe i ich finance’, EconStats database. 

Yet another way that expenditures in higher education can be measured is through spending per 
student. We have already seen that both enrolments and total expenditures were rising during the 
period  1995-2003.  However,  as  Figure  2.7  shows,  the  former  was  increasing  faster  than  the 
latter. Thus, even as total revenues in the higher education sector were increasing strongly both 
in real terms and as a percentage of GDP, they were declining in per-student terms. Conversely 
though, after 2003, even as sector revenue was falling as a percentage of GDP, it was increasing 
in per student terms because of steady or falling enrolments. 

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Figure 2.7: Funding per student from each source in zloty (1995-2011) 

12 000

10 000

8 000

6 000

4 000

2 000

0

5
9
9
1

6
9
9
1

7
9
9
1

8
9
9
1

9
9
9
1

0
0
0
2

1
0
0
2

2
0
0
2

3
0
0
2

4
0
0
2

5
0
0
2

6
0
0
2

7
0
0
2

8
0
0
2

9
0
0
2

0
1
0
2

1
1
0
2

Government

Students

Other Private

Note: Constant prices (2011). 
Source: Pre-1996, Finanse Szkół Wyższych; Post-1996, ‘Szkoły wyższe i ich finance’. 

2.2  Institutional Expenditures 

As we have seen, institutional income rose and then fell, while per-student income fell and then 
rose over our period. However, the fact that institutional income has been rising in recent years 
does not mean that it has necessarily been invested to the benefit of students: money might be 
invested in non-instructional missions.  

One  way  to  examine  this  is  to  look  at  changes  in  students-per-academic staff  ratios  and  relate 
them to changes in funding. Figure 2.8 shows the ratio of full- and part-time students to full-time 
academic staff in Poland for both public and private institutions. 

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Figure 2.8: Students-per-academic staff ratios by sector (1994-2011) 

 60

 50

 40

 30

 20

 10

 -

4
9
9
1

5
9
9
1

6
9
9
1

7
9
9
1

8
9
9
1

9
9
9
1

0
0
0
2

1
0
0
2

2
0
0
2

3
0
0
2

4
0
0
2

5
0
0
2

6
0
0
2

7
0
0
2

8
0
0
2

9
0
0
2

0
1
0
2

1
1
0
2

Source: Pre-1996, Finanse Szkół Wyższych; Post-1996, Szkoły wyższe i ich finance’. 

Public

Private

Total

Figure  2.8  shows  more  or  less  what one  would  expect.  Students-per-academic  staff  ratios  rose 
substantially  during  the  period  of  heaviest  enrolment  growth,  in  both  the  public  and  private 
sectors. At their peak in the mid-2000s, students-per--staff ratios in both sectors were about twice 
what  they  had  been  in  1994.  Then,  as  enrolments  began  to  steady  or  even  falter,  these  ratios 
began  to  decline.  While  they  did  not  return  entirely  to  the  previous  levels,  students-per--staff 
ratios did fall by 41% in private universities and by 14% in public ones. For most of the period, 
the ratio of students to academic staff members in the private sector was about 2.5 times what it 
was in the public sector, though towards the end of the decade this ratio feel to about 2:1. 

Figure  2.9  takes  the  data  from  the  two  previous  figures  (per-student  funding  and  students-per-
academic  staff  ratios)  and  puts  them  together.  What  we  see  is  more  or  less  the  expected 
relationship: as per-student income fell in the 1990s and early 2000s, the students-per-academic 
staff  ratio  rose  and  when  it  recovered  its  previous  levels  in  the  late  2000s  the  students-per-
academic staff ratio fell again. However, even though funding fully recovered its levels from the 
early 1990s, students-per academic staff ratios did not.  

There  is  a  need  for  caution  in  looking  at  this  data.  Clearly,  what  is  happening  here  is  that the 
institutions are receiving more per academic staff member. But it is unclear how they are using 
it. On the one hand, they could simply be paying faculty more money;  certainly, rules to clamp 
down  on  professors  ‘moonlighting’  (it  was  common  practice  in  Poland  in  the  1990s  for 
professors  in  public  universities  to  supplement  their  incomes  by  teaching  some  courses  at  a 
private institution as well) would have had the effect of raising the cost of academic staff in the 
private sector. On the other hand, it may also be an indication that institutions are spending their 
money on non-instructional items such as student services, or higher research budgets. 

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Figure 2.9: Funding per student in zloty and students-per-academic staff ratios 
(1995-2011) 

 12 000

 10 000

 8 000

 6 000

 4 000

 2 000

 -

25

20

15

10

5

0

5
9
9
1

6
9
9
1

7
9
9
1

8
9
9
1

9
9
9
1

0
0
0
2

1
0
0
2

2
0
0
2

3
0
0
2

4
0
0
2

5
0
0
2

6
0
0
2

7
0
0
2

8
0
0
2

9
0
0
2

0
1
0
2

1
1
0
2

Zl per student (left side)

Student-teacher ratio (right side)

Students per academic staff (right side) 

Note: Constant prices (2011). 
Source: Pre-1996, Finanse Szkół Wyższych; Post-1996, ‘Szkoły wyższe i ich finance’, author’s calculations. 

2.3  Evaluation 

The questions posed at the outset of these papers with respect to cost-sharing were as follows: 
“Has cost-sharing increased total funding?” and “how were additional funds spent”?  

With  respect  to  the  first  question,  the  answer  seems  to  be  an  unequivocal  “yes”.  There  is  no 
evidence of the Polish government substituting private funds for public ones. Through to about 
2005,  though  public  funding  was  not  keeping  up  with  exploding  student  numbers,  it  was 
increasing in real terms and as a percentage of GDP. Afterwards, when public funding did start 
to falter as a percentage of GDP, private funding did not rise to compensate as both the share of 
fee-paying students and per-student income were declining.   

One could make an argument by looking at the per-student figures that government disinvested 
and allowed private contributions to make up some of the difference. And over the period 1995-
2002, that would have had at least some merit (though few if any governments at any point in 
history  could  have  kept  up  per-student  spending  while  enrolments  tripled).  Increase  in  private 
contributions was clearly a major part of what made system expansion possible. However, if one 
looks at the period as a whole, such an argument looks less viable. In real terms, public spending 
per  student  was  almost  exactly  the  same  in  real  terms  in  2011  as  it  was  in 1995  (8038  zl.  vs., 
8058  zl.  in  constant  2011  zl.),  and  thus  all  of  the  extra  1400  zl.  per  student  per  year  that  was 
coming in student fees was additional to public investment. 

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As for how the money was spent – the details on university spending are not readily available in 
Poland.  What  we  can  note  is  that  students-per-academic  staff  ratios  understandably  rose  as 
institutional  per-student  income  fell,  once  that  income  revered  its  previous  level,  students-per-
academic staff ratios did not rebound to the same extent. For whatever reason, the extra student 
investment has not resulted in a return to smaller classes to the extent one might have expected. 

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3.  HYPOTHESIS B: AS THE INCENTIVES TO EARN 

PRIVATE FUNDING INCREASE, INSTITUTIONS BECOME 
MORE RESPONSIVE TO STUDENT DEMAND 

This  chapter  looks  at  data  relevant  to  Hypothesis  B,  which  states  that  as  incentives  to  earn 
private  funding  increase,  institutions  become  more  responsive  to  user  demand.  However,  this 
expected  effect  is  conditional  on  the  attractiveness  of  these  private  revenues  and  whether 
increasing these revenues has trade-off effects for the overall behaviour or prestige of HEIs.  

Various aspects of responsiveness will be examined, including changes to provision, enrolment 
and the connection between HEIs and users. If no changes to responsiveness are visible, this is 
likely  related  to  the  incentive  structure  present  in  the  higher  education  system,  which  might 
favour other behaviours such as the maximisation of public over private funding. 

3.1  Enrolment by Discipline  

One  hypothesis  about  the  effects  of  fees  is  that  they  make  institutions  desirous  of  increasing 
revenues  by  focusing  on  programmes  that  are  popular  or  lower-cost  courses  (these  tend  to  be 
’soft’  disciplines,  paper  and  pencil  subjects-areas).  This  may  lead  to  overall  changes  in  the 
discipline profile of a national higher education system.  

As Figure 3.1 shows, there has been a great deal of shifting of enrolment across fields of study in 
Poland over the last two decades. Health fields shrunk substantially in the 1990s and early 2000s 
before  rebounding  later.  Engineering  as  a  discipline  has  kept  its  absolute  numbers  relatively 
constant  over  time,  but  in  the  face  of  massive  increase  in  enrolments,  its  percentage  of  total 
enrolments has fallen dramatically. Education went through a brief enrolment surge around 1998 
but quickly fell back to earlier levels. Enrolment in humanities has stayed more or less even over 
time. The somewhat catch-all field of social science, business and law – the fields where private 
universities tend to concentrate their activities – expanded enormously during the period to 2002. 
It  was  in  these  fields,  clearly,  where  the  expansion  in  student  numbers  in  the  1990s  mostly 
occurred. There has of late been a drop in these fields, but a closer look suggests this may be an 
artefact  of  a  definitional  change;  the  major  drop  in  social  science  enrolment  coincides  with  a 
huge increase in students in ‘other’ fields of study. 

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Figure 3.1: Distribution of enrolment by field of study (1994-2010) 

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

Other

Services

Health, Welfare

Agriculture

Engineering

Science, Math, Computing

Soc Sci, business, law

Humanities, Arts

Education

1994

1998

2002

2006

2010

Source: Pre-1996, Finanse Szkół Wyższych; Post-1996, ‘Szkoły wyższe i ich finance’. 

3.2  Enrolment Patterns by Mode  

Without  a  doubt,  the  conditions  under  which  tuition  fees  may  be  charged  have  had  a  massive 
effect  on  the  mode  of  study  in  Poland.  Recall  that  in  public  institutions,  fees  may  only  be 
charged to part-time students. Sure enough, within a few years, over 40% of students in public 
institutions were studying part-time. It is worth noting here, though, that part-time study (which 
includes programmes offered at weekends that may have the same number of hours as full-time 
study)  was  clearly  the  preferred  format  for  those  students  who  were  part  of  the  ‘deferred 
demand’  phenomenon  and  who  already  had  jobs.  In  the  private  sector,  where  there  was  no 
similar reason for institutions to favour part-time over full-time studies (institutions would earn 
roughly  the  same  in  any  case),  75-80%  of  enrolments  were  part-time.  This  suggests  that 
institutions are responding to demand, rather than pushing students into higher-cost courses. 

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Figure 3.2: Part-time students as a percentage of total headcount (1994-2011) 

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

4
9
9
1

5
9
9
1

6
9
9
1

7
9
9
1

8
9
9
1

9
9
9
1

0
0
0
2

1
0
0
2

2
0
0
2

3
0
0
2

4
0
0
2

5
0
0
2

6
0
0
2

7
0
0
2

8
0
0
2

9
0
0
2

0
1
0
2

1
1
0
2

Source: Pre-1996, Finanse Szkół Wyższych; Post-1996, ‘Szkoły wyższe i ich finance’. 

Public

Private

Total

3.3  Enrolment Composition  

Another  possible  avenue  through  which  institutions  might  choose  to  increase  revenue  is  by 
attracting  international  students,  who  may  be  charged  fees  for  full-time  studies  in  ways  that 
domestic students cannot. 

Poland  is  a  rather  difficult  place  for  international  education:  It  has  few  institutions  possessing 
international  reputation,  Polish  is  not  spoken  much  outside  Poland  and  until  recently 
programmes  offered  in  English  were  fairly  rare.  Thus  it  is not  surprising  that  we  find  that  the 
existence  of  financial  incentives  to  attract  international  students  does  not  immediately  lead  to 
success. As Figure 3.3 shows, Poland has very low levels of inbound foreign students, with the 
proportion being under 1% for most of our period. 

There  has,  though,  been  a  significant  increase  in  international  students  in  recent  years.  As  a 
proportion of the total student population, their numbers have increased from 0.2% to 1.4%  - a 
seven-fold increase, albeit from a low base and with a declining denominator. What is intriguing, 
however,  is  the  timing  of  the  increase  in  that  it  more  or  less  coincides  with  when  part-time 
student numbers began to decline. The evidence is of course circumstantial, but it may be that the 
push for international students was simply a reaction to the fact that deferred demand had run its 
course and Polish universities were running out of domestic-fee paying students.  

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Figure 3.3: International student enrolment as a percentage of total headcount 
(1998-2011) 

2,0%

1,5%

1,0%

0,5%

0,0%

8
9
9
1

9
9
9
1

0
0
0
2

1
0
0
2

2
0
0
2

3
0
0
2

4
0
0
2

5
0
0
2

6
0
0
2

7
0
0
2

8
0
0
2

9
0
0
2

0
1
0
2

1
1
0
2

Source: Pre-1996, Finanse Szkół Wyższych; Post-1996, ‘Szkoły wyższe i ich finance’. 

3.4  Diversity of Provision  

The  particular  form  of  cost-sharing  Poland  chose  to  embrace  created  significant  diversity  of 
provision, as Figure 3.4 shows. The number of non-public institutions shot up from zero to 318 
in the decade and a half following their legalisation in 1990, far exceeding the number of public 
institutions. Most of these institutions are quite small; the average private institution has a little 
over 1,100 students (80% of them part-time) and 46 full-time academic staff. But this means they 
can be viable in quite small population centres, thus making higher education more accessible in 
smaller communities. 

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Figure 3.4: Number of HEIs by sector (1991-2011) 

350

300

250

200

150

100

50

0

318 

328 

221 

95 

114 

87 

106 

112 

113 

11 

12 

12 

17 

18 

19 

1991

1996
Public University

2001

2006

2011

Public non-University

Private non-university

Source: Pre-1996, Finanse Szkół Wyższych; ost-1996, ‘Szkoły wyższe i ich finance’. 

Though  private  institutions  now  make  up  over  70%  of  the  country’s  total,  their  small  average 
size  means  they  educate  a  much  smaller  fraction  of  the  country’s  student body.  As  Figure  3.5 
shows, the proportion of students in private institutions peaked in 2008 at 34%; by 2011 it had 
dropped back to 30%.  

Figure 3.5: Percentage of total student body educated in private universities 
(1994-2011) 

40%

35%

30%

25%

20%

15%

10%

5%

0%

4
9
9
1

5
9
9
1

6
9
9
1

7
9
9
1

8
9
9
1

9
9
9
1

0
0
0
2

1
0
0
2

2
0
0
2

3
0
0
2

4
0
0
2

5
0
0
2

6
0
0
2

7
0
0
2

8
0
0
2

9
0
0
2

0
1
0
2

1
1
0
2

Source: Pre-1996, Finanse Szkół Wyższych; Post-1996, ‘Szkoły wyższe i ich finance’. 

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One  should  note,  however,  that  for  the  most  part  these  new  institutions  were  focusing  on  a 
relatively small group of fields of study – economics, business, law and social sciences. In this 
sense, it might be said that even though there has been an increased diversity of institutions, the 
provision has in some ways become more homogenous. 

3.5  Outreach Practices  

There is no information available on outreach practices in Poland. 

3.6  Quality and Relevance  

Unfortunately, there are no real quantitative data on quality and relevance from Poland. Surveys 
of student satisfaction are not common (and unlike much of the rest of central Europe, its local 
university  rankings  do  not  rely  on  student  evaluations);  nor  do  any  large  scale  evaluations  of 
employer sentiment appear to have ever been conducted. 

3.7  Evaluation 

The broad hypothesis which was tested in this chapter was “have institutional strategies changed 
to  maximise  revenue  from  private  sources”.  This  was  done  by  looking  at  six  sub-hypotheses, 
which  will  briefly  be  reviewed  here  before  attempting  to  assess  whether  there  was  an  overall 
effect. 

The first sub-hypothesis related to whether the discipline profile of HEIs  in a country changed 
(e.g., increasing offers in paper-and-pencil subjects and fewer provisions in expensive lab-based 
areas, or focus on more popular subjects). The answer here is that it is clear that there has been a 
massive  shift  in  disciplinary  profile,  but  the  link  with  changes  in  cost-sharing  is  not 
straightforward.  The  expansion  of  higher  education  occurred  almost  entirely  in  the  fields  of 
social science and business. Whether this was where the demand lay or whether it was because 
these  courses  are  cheaper  to  offer  is  difficult  to  say;  presumably  both  factors  were  at  work  to 
some extent. What is unclear is why other fields of study did not take advantage of fee freedom 
to expand their offerings. Why did engineering or medicine not expand in the same manner? The 
answer seems to be that there was no self-sustaining market for it  – or at least that institutions 
believed that this was the case. In any event, tuition fees apparently had a decisive effect on the 
shift  between  disciplines,  but  not  for  the  reasons  that  might  be  assumed.  It  was  precisely  the 
presence, rather than the absence of new fees  which created the capacity to absorb all the new 
demand. 

The second sub-hypotheses related to whether there had been any change in the modes of study, 
such  as  an  increase  in  part-time  provision,  with  the  aim  of  increasing  private  revenue.  Again, 
clearly there has been. Part-time study – the preferred mode of study for the mid-career ’deferred 

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demand’ group and the only type of study which allows public institutions to bring in additional 
money from fees – became the norm in Poland over the last two decades, with just over 50% of 
all  students  enrolled  in  these  programmes  for  most  of  our  period.  Of  the  countries  covered  in 
these case studies, this is by far the highest percentage. 

The  third  sub-hypothesis  has  to  do  with  institutions  changing  in  enrolment  composition  to 
maximise  revenue,  such  as  by  recruiting  more  international  (non-domestic)  students  paying 
international student fees. Here, fairly clearly, the answer is small but suggestive.  International 
students  were  a  microscopic  proportion  of  the  Polish  student  body  for  most  of  our  period. 
Interestingly, however, international enrolments did start to shoot up (albeit from a low base) at 
about  the  time  that  domestic  part-time  enrolments  started  to  decrease.  In  other  words,  there  is 
circumstantial evidence that Polish institutions have used international students as an alternative 
revenue stream. 

The  fourth  sub-hypothesis  was  related  to  any  change  that  had  occurred  in  in  the  degree  of 
diversity in higher  education providers, such as more private institutions, or more programmes 
offered  by  public  institutions.  The  answer  with  respect  to  the  number  of  producers  is  yes;  the 
number of institutions has quadrupled in the past 20 years, mostly through the establishment of 
private  universities.  These  mostly  small  institutions  have  had  an  important  effect  in  making 
higher education more accessible in smaller communities.  

The  fifth  and  final  sub-hypothesis  has  to  do  with  quality  and  relevance.  Did  students  and 
graduates  become  more  satisfied  with  the  options  available  to  them?  Did  graduates  become 
satisfied with their employment outcomes? And were employers satisfied with quality of recent 
graduates? Unfortunately, the answer to this question must be tentative because of such a lack of 
evidence. We have no quantitative data whatsoever on the views of students and employers.  

And  so,  to  the  summative  question:  have  institutional  strategies  changed  to  maximise  revenue 
from  private  sources?  The  answer  to  this  is  almost  certainly  yes,  bearing  in  mind  that  the 
available data is less complete than it might be. 

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4.  HYPOTHESIS C: INCREASING PRIVATE FUNDING HAS 

A NEGATIVE EFFECT ON PARTICIPATION 

This  chapter  looks  at  data  relevant  to  Hypothesis  C,  which  states  that  as  private  funding 
increases,  costs  increase  to  students  and  their  families,  which  in  turn  may  have  an  impact  on 
quantitative student demand and on the composition of the student body.  

In order to assess this, it is important to look at:  

 

the real costs to students, including direct and indirect support provided by the state, which 
may discount the gross costs 

  how tuition fees are organised: Who pays and who does not pay? When do you pay – as a 

 

student or as a ‘successful’ graduate (with a well-earning job)? 
the  overall  trend  of  participation  rates  in  the  country  in  question,  i.e.  expanding,  stable  or 
contracting? 

4.1  Students’ Costs for Higher Education  

Under the pre-1989 socialist government of Poland, higher education was free. The decision to 
allow  substantial private  funds  into higher  education, both  via private  universities  and  through 
fees in public universities, happened prior to the period covered in this case study, so the initial 
costs associated with these decisions are not known. Available data only permits us to pick up 
the story in 1995, a couple of years after these decisions.  

Figure  4.1  describe  the  trends  over  time  with  respect  to  student  fees  in  real  terms  (note,  for 
public institutions, data is for fee-paying students only). In 1995, such fees as were charged were 
in  real  terms  considerably  higher  in  public  universities  than  they  were  in  private  ones:  12,000 
zloty  for  public  universities  vs.  a  little  over  9,000  zloty  for  public  non-universities  and  only 
about 4500 zloty for private institutions. This may to some readers appear strange – why should 
publicly-funded institutions charge more than institutions which must survive on fees alone? The 
answer would seem to be “because they can” – their prestige simply allowed them to do it.  

Over  time,  fees  in  the  public  and  private  sectors  converged  somewhat.  As  private  institutions 
gained a track record, they  were able to charge more, and public institutions allowed tuition to 
fall in real terms. By 2003, average fees across the three sectors were in a relatively narrow band 
between  6,000  and  8,000  zloty.  Since  that  time,  fees  in  the  private  sector  have  stayed  fairly 
constant, while fees at public universities have returned to their previous highs.  

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Figure 4.1: Tuition fees, in zloty (1995-2011) 

14 000

12 000

10 000

8 000

6 000

4 000

2 000

0

5
9
9
1

6
9
9
1

7
9
9
1

8
9
9
1

9
9
9
1

0
0
0
2

1
0
0
2

2
0
0
2

3
0
0
2

4
0
0
2

5
0
0
2

6
0
0
2

7
0
0
2

8
0
0
2

9
0
0
2

0
1
0
2

1
1
0
2

PT Public Universities

PT Public Non-universities

Private

Note: Constant prices (2011). 
Source: Pre-1996, Finanse Szkół Wyższych; Post-1996, ‘Szkoły wyższe i ich finance’. 

Of course, at public institutions only students in part-time studies pay fees.  If one  looks at the 
percentage of students who were part-time in any given year, the previous graph begins to make 
more sense. The fall in tuition fees at public institutions coincided with a rise in the number of 
students wanting to take them. In effect, institutions could charge less in real terms and make up 
the  difference  on  volume.  Once  the  part-time  numbers  started  to  fall,  the  average  fee  stopped 
falling  and  eventually  began  to  rise  again.  In  a  sense,  it  does  not  seem  as  though  university 
leaders were not actually chasing maximum private funds, but rather trying to keep private funds 
at a certain proportion of total income. 

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Figure 4.2: Percentage of public university students that were fee-paying (1995-
2011) 

55%

50%

45%

40%

35%

30%

25%

20%

15%

5
9
9
1

6
9
9
1

7
9
9
1

8
9
9
1

9
9
9
1

0
0
0
2

1
0
0
2

2
0
0
2

3
0
0
2

4
0
0
2

5
0
0
2

6
0
0
2

7
0
0
2

8
0
0
2

9
0
0
2

0
1
0
2

1
1
0
2

Public Universities

Public non-Universities

Source: Pre-1996, Finanse Szkół Wyższych; Post-1996, ‘Szkoły wyższe i ich finance’. 

Of  course,  because  not  all  students  pay  fees,  the  amount  of  private  revenue  per  student  is 
considerably lower in public than in private institutions. 

Figure 4.3: Average tuition per student, in zloty (1995-2011) 

8 000

7 000

6 000

5 000

4 000

3 000

2 000

1 000

0

5
9
9
1

6
9
9
1

7
9
9
1

8
9
9
1

9
9
9
1

0
0
0
2

1
0
0
2

2
0
0
2

3
0
0
2

4
0
0
2

5
0
0
2

6
0
0
2

7
0
0
2

8
0
0
2

9
0
0
2

0
1
0
2

1
1
0
2

PT Public Universities

PT Public Non-universities

Private

Note: Constant prices (2011). 
Source: Pre-1996, Finanse Szkół Wyższych; Post-1996, ‘Szkoły wyższe i ich finanse’. 

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Cost of Living 

Student living conditions have not been thoroughly studied in Poland. The only aspect of it for 
which  we  have  more  than  one  observation  is  with  respect  to  living  arrangements.  In  2000, 
Świerzbowska-Kowalik  and  Gulczyńska  (2000)  noted,  based  on  a  survey  of  students  in  free 
places,  that  half  the  students  still  lived  with  their  parents,  20.9%  were  renting  a  room  or  flat 
outside  student  halls,  around 17%  lived  in  their  own  apartments, and  less  than 10%  lived  in  a 
student hall. Data from EUROSTUDENT IV, a decade later (2010), showed something relatively 
similar: 53% living at home and 6.4% living in student halls. 

This same 2010 EUROSTUDENT data is the only source we have to examine students’ living 
costs in Poland. Table 4.1 shows costs of living for students living at home and away from home.  

Table 4.1: Monthly student living costs, in zloty, by living arrangements 

Students living with parents 

Students not living with parents 

Accommodation 

Daily costs (food, clothing, 
toiletries etc.)  

Social and leisure activities 

Transportation 

Health costs 

Communication 

Child care 

Tuition fees 

Learning materials 

Social welfare contributions 

Other regular costs 

Total 
Source: EUROSTUDENT IV database. 

Student Grants  

40.76 

164.74 

131.7 

97.6 

17.17 

49.97 

4.33 

119.83 

16.74 

0.47 

101.43 

745.0 

272.47 

316.78 

122.92 

96.62 

23.8 

60.34 

23.46 

84.62 

19.48 

0.48 

156.55 

1,178.0 

As  in  many  former  socialist  countries,  financial  aid  for  students  consists  mostly  of  grant 
programmes. Since 2004, Poland has on average spent roughly 3  - 3.5 billion zloty per year in 
non-repayable aid to students. The overall budget for such assistance is set by legislation: In the 
Budgetary  Law for 2001, 2.2% of the total Ministry of Education subsidy for student financial 
support  was  designated  for  maintenance  grants  for  full-time  students  in  non-public  HEIs.  In 
subsequent years, this was increased to 2.7%.  

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By  far  the  largest  of  the  grant  programmes,  covering  two-thirds  of  all  expenditures,  are  the 
subsidised room & board which public universities provide to their students (each institution is 
provided  with  an  allocation  of  funds  by  government  for  this  purpose,  based  on  an  enrolment-
driven formula). Accommodation grants are awarded to full-time students with financial need to 
cover their costs of accommodation in a student dormitory or any other facility, provided that the 
daily  travel  to  the  place  of  study  would  prevent  them  from,  or  significantly  hinder  them  in, 
studying. For married students, this grant can also cover accommodation for the spouse if he/she 
does  not  work,  as  well  as  for  any  children  they  may  have.  Students  must  apply  directly  to  the 
university  for  the  grant.  Similarly,  students  in  need  may  apply  to  receive  subsidised  food  on 
campus.  

In  addition to  these  grants there  are  three  other  major programmes  of  note.  Two  major  sets  of 
scholarships, costing roughly half a billion zloty per year each, are awarded for ‘social need’ and 
‘merit’,  respectively.  A  small  programme  to  provide  financial  assistance  for  students  with 
disabilities also exists.  

Prior to 2001, all of these grants were only available to students in public institutions; since then, 
full-time students at private universities are also eligible for the subsidy. Total expenditures for 
these programmes are shown below in Figure 4.4. 

Figure 4.4: Total expenditure on grants programmes, in thousands of zloty 
(1995-2011) 

3 000 000

2 500 000

2 000 000

1 500 000

1 000 000

500 000

0

5
9
9
1

6
9
9
1

7
9
9
1

8
9
9
1

9
9
9
1

0
0
0
2

1
0
0
2

2
0
0
2

3
0
0
2

4
0
0
2

5
0
0
2

6
0
0
2

7
0
0
2

8
0
0
2

9
0
0
2

0
1
0
2

1
1
0
2

social grants

merit grants

Grants for students w/disabilities

Subsidized room & board

Note: Constant prices (2011). 
Source: Pre-1996, Finanse Szkół Wyższych; Post-1996, ‘Szkoły wyższe i ich finanse’. 

Figure  4.5  shows  the  number  of  recipients  of  each  of  these  grants.  The  exact  number  of 
recipients of the room/board grants is unknown, though it is clearly in the hundreds of thousands. 
Details of the grants by type of institution are not available. Figure 4.6 shows the average amount 

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of grant per recipient. Though the social grant and the grant for disability have been relatively 
stable  over  time,  the  merit  grant  has  been  less  stable,  with  significant  variations  in  both  the 
number and value of the awards. 

Figure 4.5: Number of recipients by type of grant (1995-2011) 

300 000

250 000

200 000

150 000

100 000

50 000

0

5
9
9
1

6
9
9
1

7
9
9
1

8
9
9
1

9
9
9
1

0
0
0
2

1
0
0
2

2
0
0
2

3
0
0
2

4
0
0
2

5
0
0
2

6
0
0
2

7
0
0
2

8
0
0
2

9
0
0
2

0
1
0
2

1
1
0
2

social grants

Grants for students w/disabilities

merit grants

Source: Pre-1996, Finanse Szkół Wyższych; Post-1996, ‘Szkoły wyższe i ich finanse’. 

Figure 4.6: Average value of grant, by type, in zloty (1995-2011) 

9 000

8 000

7 000

6 000

5 000

4 000

3 000

2 000

1 000

0

5
9
9
1

6
9
9
1

7
9
9
1

8
9
9
1

9
9
9
1

0
0
0
2

1
0
0
2

2
0
0
2

3
0
0
2

4
0
0
2

5
0
0
2

6
0
0
2

7
0
0
2

8
0
0
2

9
0
0
2

0
1
0
2

1
1
0
2

social grants

Grants for students w/disabilities

merit grants

Note: Constant prices (2011). 
Source: Pre-1996, Finanse Szkół Wyższych; Post-1996, ‘Szkoły wyższe i ich finanse’. 

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Figure  4.7 displays  both the  number  of  awards  made  and  the  total  value of  the  awards  (again, 
excluding the room and board subsidies for  which data is not available). Though the picture is 
obscured somewhat by the mid-decade changes in policy around merit awards, the overall trend 
in the country is to give out more, smaller grants.  

Figure 4.7: Number of awards vs. award-value, in zloty (1995-2011) 

600 000

500 000

400 000

300 000

200 000

100 000

0

5 000
4 500
4 000
3 500
3 000
2 500
2 000
1 500
1 000
500
0

5
9
9
1

6
9
9
1

7
9
9
1

8
9
9
1

9
9
9
1

0
0
0
2

1
0
0
2

2
0
0
2

3
0
0
2

4
0
0
2

5
0
0
2

6
0
0
2

7
0
0
2

8
0
0
2

9
0
0
2

0
1
0
2

1
1
0
2

# of awards (left-side)

Avg. Award (right side)

Note: Constant prices (2011). 
Source: Pre-1996, Finanse Szkół Wyższych; Post-1996, ‘Szkoły wyższe i ich finanse’. 

Student Loans 

A student loan scheme has been in place in Poland for almost 15 years. However, unlike some 
countries, it has never become a major factor in student finance. At the moment, fewer than 5% 
of students in Poland avail themselves of a student loan. 

The  student  loan  scheme  was  introduced  in  Poland  in  1998  with  eligibility  limited  to 
undergraduate and graduate students with Polish citizenship (or EU nationals resident in Poland), 
who  first  enrolled  in  a  HEI  under  the  age  of  26.  These  awards  were  income-tested;  in its  first 
year  of  operation,  the  loans  were  restricted  to  students  from  families  with  monthly  incomes 
below  550  zloty/month.  Since  then,  the  amount  has  increased  to  roughly  3,000  zloty/month. 
Although the award is made to students rather than parents, a loan guarantor is required, which is 
usually  a  parent.  Interest  rates  vary  by  family  income.  For  poorer  students,  the  rates  are  set  at 
half the level of the National Bank of Poland’s discount rate; for wealthier ones, the rate can be 
as high as 130% of the discount rate. There is a two-year grace period following studies in which 
no  repayments  have  to  be  made;  however,  the  repayment  period  is  then  limited  to  twice  the 
period over which the student borrowed (i.e. if he/she borrowed for one year, then the repayment 
period will be set at two years). Some debt may be forgiven as a reward for high performance; if 

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a student finishes his/her degree in the top 5% of his/her class, they may receive a 30% reduction 
of their outstanding debt. 

In  the  first  year  of  operation,  the  loan  scheme  attracted  nearly  100,000  borrowers.  Since  then, 
new borrowers have fallen to about 20,000 per year. Of these, roughly two-thirds are in full-time 
study  and  80%  are  in  public  universities.  A  2007  OECD  country  study  on  Polish  higher 
education suggested that the reason for the programme’s decline was uncertainty of employment 
after graduation due to the continuously high rate of unemployment; another factor cited was the 
difficulty  for  students  in  finding  guarantors  (Fulton,  Santiago,  Edquist,  El-Khawas,  &  Hackl, 
2007). A third possibility, not mentioned by the OECD, is the loans’ relatively short repayment 
period.  

Net Costs 

In this section we define net costs as average tuition fees minus average subsidies (i.e. grants). 
What  we  see  in  Figure  4.8  is  that  the  net  average  cost  in  public  institutions  has  remained 
essentially  constant  over  our  entire  period  at  around  2,000  zloty.  The  situation  for  private 
universities  is  somewhat  different.  Prior  to  2002,  tuition  and  net  price  were  the  same  because 
government  rules  did  not  permit  the  distribution  of  aid  to  non-public  institutions.  However, 
following  the  elimination  of  that  rule,  a  substantial  amount  of  assistance  flowed  to  students  in 
that sector. As a result, even though tuition fees in the sector rose by over 55% in our period, net 
costs rose by only about 15%. 

Figure 4.8: Various measures of net tuition, in zloty (1995-2011) 

8 000

7 000

6 000

5 000

4 000

3 000

2 000

1 000

0

5
9
9
1

6
9
9
1

7
9
9
1

8
9
9
1

9
9
9
1

0
0
0
2

1
0
0
2

2
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2

3
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0
2

4
0
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2

5
0
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2

6
0
0
2

7
0
0
2

8
0
0
2

9
0
0
2

0
1
0
2

1
1
0
2

Public Tuition

Private Tuition

Net Public Tuition

Net Private Tuition

Note: Net tuition is student tuition minus grants. Constant prices (2011). 
Source: Pre-1996, Finanse Szkół Wyższych; Post-1996, ‘Szkoły wyższe i ich finanse’. 

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Relative Earnings 

One important factor to consider in terms of access is how the financial gain of attending higher 
education  evolved  over  time.  All  other  things being  equal, a  rise in  relative  earnings  of higher 
education graduates should exert upwards pressure on participation as it makes education a more 
attractive  investment.  As  Figure  4.9  shows,  there  was  indeed  a  major  increase  in  the  earning 
premium  of  graduates  in  Poland,  but  they  seem  to  have  occurred  after  the  major  jump  in 
participation. 

Figure 4.9: Relative earnings of tertiary education graduates (1998 – 2010) 

185

180

175

170

165

160

155

150

145

140

8
9
9
1

0
0
0
2

2
0
0
2

4
0
0
2

6
0
0
2

8
0
0
2

0
1
0
2

Note: Indexed to the earnings of a secondary school graduate (=100). 
Source: OECD ‘Education at a Glance’, various years. 

Figure 4.10 shows a somewhat crude way of  looking at whether or not the return on students’ 
investment  is  rising  or  falling  over  time.  The  solid  line  represents  the  earnings  premium 
described  in  Figure  4.9.  The  hashed  and  dotted  lines  represent  the  net  cost  of  education  for 
students  in public  and  private  universities,  respectively.  This  is  essentially  the  same  data  from 
Figure  4.8  except  that  it  consists  of  a  moving  3-year  average,  to  simulate  the  costs  of  a  full 
Bachelor degree. What Figure 4.10 shows is that on average, net costs have changed at more or 
less the same rate as changes in the earnings premium.  

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Figure 4.10: Earnings premiums vs. net costs (1998-2010) 

130

120

110

100

90

80

70

8
9
9
1

9
9
9
1

0
0
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2

1
0
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2
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3
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0
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2

6
0
0
2

7
0
0
2

8
0
0
2

9
0
0
2

0
1
0
2

Net Public Tuition

Net Private Tuition

Earnings premium

Note: Net costs indexed to 1998 value (=100), relative earnings indexed to earnings of a secondary school graduate 
(=100). 
Source: Pre-1996, Finanse Szkół Wyższych; Post-1996, ‘Szkoły wyższe i ich finanse’, OECD ‘Education at a Glance’, 
author’s calculations. 

4.2  Participation Rates  

A key question to address in this research is whether changes in cost-sharing have had an impact 
on transition rates from secondary education and on overall participation rates. 

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Figure4.11: Participation vs. various cost indices 

Source: 

4.3  Composition of the Student Body  

Polish data collection on issues relating to the composition of the student body is fairly limited in 
comparison  to  other  countries.  The  population  is  relatively  homogenous  so  there  is  no  data 
collection with respect to participation rates by various ethnic groups. It is known that in 2008 
roughly  1.3%  of  the  student  population  had  a  disability  (Herbst  &  Rok,  2011),  but  it  is  not 
known how this figure has changed over time.  

There  is  no  regular  data  collection  on participation by  family  income  or  social  class,  either.  A 
variety of studies (Białecki, 2003; Domański, 2000) have noted significant gaps in participation 
by  social  background,  which  Sztanderska  and  Liwiński  (2007),  noting  the  significant  gaps  in 
secondary school completion suggests is likely due to barriers in educational pathways that occur 
well  before  the  point  of  entering  higher  education.  Another  study,  by  Świerzbowska-Kowalik 
and  Gulczyńska  (2000)  noted  the  significant  social  gap  among  full-time  public  university 
students;  namely,  that  students  whose  parents  have  higher  education  were  significantly  over-
represented  in  this  group.  This  is  an  important  finding  because  it  suggests  that  in  Poland,  the 
largest subsidies are going to students from financially affluent families. 

However, while all of these reports are useful, none of them provide a time-series of data which 
might  show  the  effects  of  cost-sharing.  The  only  source  for  this  is  a paper  by  Herbst  and  Rok 
(2011),  who  use  data  from  the  National  Household  Survey  to  derive  participation  rates  by 
income quintile. This is reproduced below in Figure 4.12. At the end of the period for which data 
is available (2008), they found that access rates for the top income quintile were 50%, compared 

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00.20.40.60.811.200.20.40.60.811.21995199619971998199920002001200220032004200520062007200820092010TuitionNet TuitionNet tuition minus TENet tuition minus TE and loansParticipation rate 
National Report for Poland 

to 20% for the lowest income quintile. What their trend data shows is that participation rates rose 
steadily for all quintiles across our period. In absolute terms, the gains were greatest for the top 
quintile, but in relative terms they were largest for the bottom quartiles.  

Figure 4.12: Participation rates by income quintile (1994-2008) 

60%

50%

40%

30%

20%

10%

0%

4
9
9
1

5
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6
9
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0
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2

quintile 1

2

1
0
0
2

3

2
0
0
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3
0
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2

4

4
0
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5
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0
0
2

7
0
0
2

8
0
0
2

quintile 5

Note: Quintile 1= lowest income, quintile 5= highest income. 
Source: Herbst and Rok, 2011. 

Herbst  and  Rok  also  performed  a  logistic  regression  on  their  household  survey  data  (Figure 
4.13),  to  show  how  the  odds  of  attending  for  the  top  4  income  quinles  change  vis-a-vis  the 
bottom  quintile.  This  requires  a  bit  of  interpretation.  A  rising  line  does  not  necessarily  mean 
rising  participation  –  it  means  rising  likelihood  of  participation  relative  to  youth  from  poorest 
quintile. This could occur either because the subject group participation is rising faster than the 
reference group, or because the participation of the reference group is falling. Similarly, a falling 
line  only  means  a declining  likelihood  of participation  relative  to  the  reference  group; it  could 
either  mean  that  the  subject  group has  a  lower  likelihood  of  participation  or  that  the  reference 
group’s participation rates is simply rising more quickly than that of the subject group.  

With  that  in  mind,  what  Figure  4.13  shows  is  that  participation  gaps  on  the  basis  of  income 
widened significantly between 1995 and 2002. Recall from our earlier discussions that this was 
precisely the period when tuition at public institutions was falling. From about 2003 to 2008, a 
period  when  tuition  was  rising  at  public  and private  institutions  alike,  the  gaps  began  to  close 
again, though naturally there remained a significant difference between participation rates of the 
top and bottom quintiles. 

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Figure 4.13: Odds of participation in higher education for different income 
quintiles, with first income quintile (lowest) as reference category 

4,0

3,5

3,0

2,5

2,0

1,5

1,0

0,5

0,0

5
9
9
1

6
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7
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9
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8
9
9
1

9
9
9
1

0
0
0
2

1
0
0
2

2
0
0
2

income quintile 2

income quintile 3

3
0
0
2

4
0
0
2

5
0
0
2
income quintile 4

6
0
0
2

7
0
0
2

8
0
0
2

income quintile 5

Note: Estimated through logistic regression. First quintile (lowest) is the reference category. 
Source: Herbst & Rok (2011). 

4.4  Completion Rates  

There does not appear to be any empirical data on this question in Poland.  

4.5  Evaluation 

Our evaluation here consists of answering four separate sets of questions.  

First,  how  have  increases  in  private  funding  changed  costs  to  students?  The  answer  for  our 
period is that there were very few changes in costs per students. Fees fell and then rose again, but 
in 2010, net costs in both the public and private university sector were more or less  what they 
were in 1994. This was mostly due to deliberate policy  decisions of public universities (which 
chose  to  let  tuitions  fall  when  demand  was  high)  and  the  government  (which  chose  to  expand 
grants, in particular to students at private institutions).The second question here is:  what effect 
does an increase in private funding have on participation rates? The answer here is unclear. We 
can  say  with  certainty  that  the  presence  of  fees  did  not  dissuade  Poles  from  attending  higher 
education in unprecedented numbers. We also know that enrolment in private higher education 
increased  most  strongly  during  a  period  when  net  costs  to  students  were  rising  fairly  rapidly; 
conversely,  enrolments  in  the  private  sector  fell  during  a  period  when  net  costs  were  actually 
falling (though sticker prices were rising). It would therefore be difficult to argue that tuition fees 

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had a significant impact on access, though one cannot rule out that results might have been better 
in their absence. 

A third question is “how have changes in private funding affected the composition of the student 
body”? Again, part of the challenge lies in the ambiguous nature of the trends in private funding 
in Poland. One interesting piece of data is that the participation gap between rich and poor was at 
its  widest  when  education  in  public  universities  was  at  its  cheapest,  and  began  falling  once 
tuition  started  to  rise.  It  is  unclear  why  any  of  this  should  have  happened,  and  of  course,  the 
finding is correlation, not causation. However, it would be difficult to argue on the basis of the 
Polish experience that increases in gross tuition fees are incompatible  with improved equity of 
access to higher education. 

In  summary,  tuition  rose  throughout  our  period  in  private  higher  education,  but  in  public 
education  it  fell  for  a  long  period  of  time  in  real  terms  before  rising  again  and  returning  to 
roughly  its  original  levels  by  2010.  Regardless  of  the  different  cost  approaches,  enrolments 
boomed  in  both  sectors.  The  drop  in  part-time  students  towards  the  end  of  the  last  decade 
appears to be due more to demographic factors and the end of ‘deferred demand’ than to any cost 
factors.  

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5.  HYPOTHESIS D: INCREASING PRIVATE FUNDING 
AFFECTS STUDENT CHOICE OF HOW OR WHAT TO 
STUDY 

This  chapter  looks  at  data  relevant  to  Hypothesis  D,  which  states  that  as  private  funding 
increases,  costs  increase  to  students  and  their  families,  which  in  turn  will  have  an  impact  on 
students’ choice of how and what to study. Accordingly, this section looks at these topics: have 
student age, location or field of study and time to completion changed over time in relation to 
cost-sharing? 

5.1  Student Study Patterns  

As we saw in Figure 3.5, over half of the Polish student body studies in a non-traditional manner 
– either part-time or on weekends. And this is despite the fact that this is the more expensive way 
to study. This might suggest that students are extremely cost-insensitive, and are prepared to pay 
more for convenience 

Now  it  is  worth  considering  that  because  of  demographic  factors  and  the  Polish  examination 
system,  students  do  not  always  have  much  choice  about  their  study  mode.  Students  in  the 
‘deferred  demand’  category  in  most  cases  have  jobs  they  cannot  leave  and  hence  study  on 
evenings and weekends. Traditional-aged students in part-time studies are for the most part those 
who did not get sufficiently high marks on their maturity examinations. 

In short, there is not a great deal of choice involved in the mode of study in which students end 
up engaged in. It would therefore be difficult to conclude very much about the effects of fees on 
study  patterns  other  than  to  note  simply  that  higher  costs  do  not  seem  to  put  people  off  non-
traditional forms of study. 

5.2  Location of Study  

This is a difficult question to answer in Poland as there is little systemic data collection on this 
topic. What is clear, though, is that the creation of a private university sector allowed universities 
to open in more remote parts of the country and thus open up access to students who would not 
otherwise have been able to attend. 

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5.3  Field of Study  

As  we  noted  back  in  Section  3  (see  Figure  3.1),  there  does  appear  to  have  been  a  significant 
change in enrolment patterns in Polish higher education. Specifically, the expansion appears to 
have been in lower-cost disciplines in business and the social sciences. That would tend to lead 
one  to  believe  that  the  enrolment  changes  are  supply-driven,  rather  than  demand-driven,  as  it 
would  be  if  the  expansion  were  in  areas  with  the  highest  returns  to  education.  We  cannot  be 
absolutely certain this is the case as we do not have solid data on graduate earnings by discipline, 
for Poland.  

5.4  Time-to-Completion  

There  does  not  appear  to  be  any  data  on  time-to-completion  for  Poland.  We  are  unable  to 
examine this question. 

5.5  Evaluation 

Hypothesis D suggested that rather than having an absolute effect on the level of participation, 
the  liquidity  issues  that  stem  from  increased  tuition  levels  may  lead  to  students  switching  to  a 
different  mode  of  delivery  that  enables  them  to  study  whilst  working  and  earning  income,  or 
delay  participation  to  work  to  save  money  before  entering  higher  education.  Specifically,  four 
sub-hypotheses about the potential impact of higher tuition were examined:  

First, with respect to ‘how’ students study, it was hypothesised that increases in private funding 
might  lead  to  changes  in  study  mode  (part-time  versus  full-time  study)  and  delays  in  entry. 
However, given that the number of ‘free’ places is fixed and that a large portion of students in 
our period were older, ‘deferred demand’ students who could only study part-time due to work 
commitments, it is difficult to say much about ‘choice’. 

Second,  with  respect  to  whether  increases  in  private  funding  have  affected  students’  choice  of 
study location either in terms of where within a country a student choses to study or whether  it 
has  affected  plans  to  study  internationally,  there  are  little  to  no  data  available  to  look  at  this 
question. We do know that the establishment of many small private universities in more remote 
areas were only made possible by the arrival of a cost-sharing system, so it seems likely that a 
greater fraction of students now live at home than they previously did. 

Third, with respect to whether increases in tuition have affected what students study, as we noted 
earlier,  there  have  been  changes  in  the  degree  profile,  but  it  is  unclear  whether  these  changes 
were supply-driven or demand-driven.  

Fourth, with respect to increases in fees making students more efficient and taking less time to 
complete their education, there is no data available on which to test this proposition.  

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In sum, because of data limitations, it is difficult to conclude very much about the effects of cost-
sharing on choice. On one specific point (mode of study), it should be noted that the structure of 
the higher education system itself renders the concept of choice somewhat hypothetical. 

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6.  CONCLUSION 

The study of Poland divides itself roughly into two periods. Prior to 2004, all forms of funding of 
higher  education  were  rising  in  aggregate  terms  (though  individual  tuition  fees  in  public 
institutions  were  declining  on  an  average  basis).  During  this  period,  all  types  of  enrolment  – 
public, private, full-time and part-time were all increasing. After 2004, both aggregate public and 
private  funding  started  to  erode  in  real  terms  (though individual  tuition  fees  were  rising  on  an 
average basis). During this period, part-time enrolments began to fall in both public and private 
universities.  

With respect to Hypothesis A, it can be confirmed that cost-sharing most certainly increased total 
funding. During the period when private contribution were rising, public contributions also rose; 
when public contributions began to decline, so too did private ones. There  was no substitution 
effect at work at any point in our period. 

With  respect  to  Hypothesis  B,  it  can  be  said  with  some  confidence  that  some  institutional 
strategies changed to maximise revenue from private sources. Certainly, legislation permitting a 
non-state higher education sector allowed enormous numbers of new institutions to thrive, all of 
which  had  income-maximising  goals.  Public  institutions  took  to  the  revenue-raising  game  as 
well, establishing vast new part-time programmes for the purpose of raising revenue. There are, 
however,  some  signs  of  satisficing  behaviour  among  public  institutions.  They  did  not  always 
maximise revenue; in fact, they allowed tuition to diminish in constant prices even as demand for 
part-time studies was rising sharply in the late 1990s, and they only chose to pursue funds from 
international students once the domestic part-time market began to soften.  

With respect to Hypothesis C, the picture is somewhat mixed. Tuition rose throughout our period 
in  private  higher  education  (though  its  net  price  fell  somewhat  after  the  government’s  2001 
decision to provide assistance to students at private universities), but in public education it  fell 
for a long period of time in real terms before rising again and returning to roughly its original 
levels by 2010. Regardless of the different cost approaches, enrolments boomed in both sectors. 
Towards the end of the last decade there was a fall-off in enrolments, but this seems likelier to be 
due to demographic factors and the end of ‘deferred demand’ than to cost factors; among young 
Poles, participation rates have remained quite solid in the past few years.  

Finally,  with respect to  Hypothesis D,  data are extremely limited and so few solid conclusions 
can  be  drawn.  It  is  noted,  however,  that  there  are  some  significant  limits  on  student  choice  in 
Poland due to the way places in full-time study are allocated.  

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Białecki, I. (2003). Dostępność kształcenia na poziomie wyższym w Polsce. Biuletyn Biura 

Studiów I Ekspertyz (Kancelaria Sejmu), 46(2). 

Domański, H. (2000). Selekcja ze względu na pochodzenie społeczne do szkoły średniej i na 

studia wyższe. Nauka I Szkolnictwo Wyższe, 16(2). 

Fulton, O., Santiago, P., Edquist, C., El-Khawas, E., & Hackl, E. (2007). OECD Reviews of 

Tertiary Education: Poland. Paris: OECD Publishing. Retrieved from 
http://www.oecd.org/poland/39321279.pdf 

Herbst, M., & Rok, J. (2011). Equity in an educational boom: Lessons from the expansion and 

marketization of tertiary schooling in Poland. MPRA Paper 33795. Munich: University 
Library of Munich. 

Świerzbowska-Kowalik, E., & Gulczyńska, H. (2000). Dostępność wyższego wykształcenia – 

materialne i społeczne uwarunkowania. Warsawa: Cetrum Badań Polityki Naukowej i 
Szkolnictwa Wyższego, Uniwersytet Warszawski. 

Sztanderska, U., & Liwiński, J. (2007a). Beneficjenci polityki edukacyjnej państwa. In Edukacja 

dla pracy: Raport o Rozwoju Społecznym Polska 2007. Warsawa: United Nations 
Development Programme. 

Sztanderska, U., & Liwiński, J. (2007b). Determinanty wyborów edukacyjnych młodzieży. In 

Edukacja dla pracy: Raport o Rozwoju Społecznym Polska 2007. Warsawa: United Nations 
Development Programme. 

Szkoły  wyższe  i  ich  finance  [Higher  Education  Institutions  and  Their  Finances].  Central 

Statistical Office. Available at: http://www.stat.gov.pl/gus/index_PLK_HTML.htm. 

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PORTUGAL 

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ACKNOWLEDGEMENTS 

The authors would like to acknowledge the support in data research and interpretation provided 
by Luisa Cerdeira, Ph.D. (Auxiliary Professor, University of Lisbon). 

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1.  INTRODUCTION 

1.1  Overview of Higher Education in Portugal  

Portugal  has  a  population  of  10.5  million  people  and  currently  roughly  400,000  enrolled 
students. The Portuguese higher education system is binary in nature, divided into university and 
polytechnic streams, with each subsystem containing public and private institutions. At present 
there  are  160  higher  education  institutions  (HEIs)  -  of  which  fourteen  are  public  universities 
(plus  five  ‘university  level  institutions’  such  as  the  Military  and  Naval  universities  which  are 
government-run but not  generally  considered  part  of the  system  of  public  universities),  and 31 
are public polytechnic institutes.  

Table 1.1: Categorisation of Portuguese HEIs, 2006 

Public 

Private 

Total 

Source: OECD. 

University 

Polytechnic 

19 

48 

67 

31 

62 

93 

Within  this  binary  system  a  further  distinction  exists  between  specialised  HEIs  (often  with  a 
single  educational  focus,  such  as  police  or  military  institutes),  and  larger,  multi-focused,  more 
comprehensive institutions. 

Access to these public institutions of higher education is subject to numerus clausus (‘restricted 
numbers’), and thus Portuguese students must compete for a predetermined number of openings. 
Students who wish to apply must possess a secondary school diploma, and must have achieved a 
certain score on subject-specific exams (though a certain number of admission spots are held for 
students who are over 23 years old and do not meet the aforementioned criteria). 

The degree granting structure of Portuguese higher education has shifted over the past decade. 
Prior  to  2006,  universities  alone  were  permitted  to  conduct  fundamental  research,  as  well  as 
research and development, and only these institutions were permitted to award Master degrees. 
In 2007, however, the Portuguese government passed new legislation (Law No. 62/2007), based 
on  the  Bologna  Process,  which  allowed  any  institution  –  university  or  polytechnic  –  to  award 
both licenciatura (first cycle) as well as Master degrees. Doctoral degrees, however, can only be 
conferred by universities. Additionally, since the passage of this law, several polytechnics have 
established units of research and development. 

Administration and coordination of the Portuguese higher education system is the responsibility 
of  the  Ministério  da  Ciência,  Tecnologia  e  Ensino  Superior  (Ministry  of  Science,  Technology 

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and Higher Education), established in 1995, and providing for a certain degree of connectivity 
between  the  systems  of  university  and  polytechnic.  Articulating  their  position  in  2008,  the 
Ministry released the Framework for Higher Education Qualifications (FHEQ), which following 
the  Bologna  Process,  offered  a  structural  outline  within  which  to  promote  tertiary  educational 
standards – providing points of reference for setting academic standards, assisting with outlining 
progression routes, and promoting understanding of academic expectations. 

Within this FHEQ outline, there exist varying levels of autonomy and government oversight into 
higher  education  depending  on  the  educational  stream:  university  vs.  polytechnic,  public  vs. 
private. Public universities enjoy a high, and codified, level of autonomy (pedagogical, scientific, 
and financial), sanctioned both by the Constitution, and the University Autonomy Act of 1988 – 
which  also  transferred  physical  plant  ownership  to  the  universities  themselves.  Here,  the 
government  has  taken  a  hands-off  approach,  allowing  public  universities  full  autonomy  in  the 
creation and delivery  of  all  degree  programmes  –  though they  still  register  with  the  Direcção-
Geral do  Ensino  Superior  (State  Agency  for  Higher  Education  –  DGES).  Public  polytechnics, 
comparatively, have less autonomy. Although consolidated by the 1986 Comprehensive Law of 
the  Educational  System,  public  polytechnics  do  not  own  their  buildings,  cannot  change  the 
staffing scales, and do not possess full pedagogic autonomy. The creation of degree programmes 
by  public  polytechnics  is  regulated  by,  and  requires  approval  from,  the  government.  Further, 
public polytechnics are not allowed to create, suspend or cancel programmes without submitting 
proposals for government approval. Private institutions, as well, find themselves subject to close 
government  oversight.  The  Private  Higher  Education  Act  contains  no  reference  to  external 
participation in academic government bodies, meaning that institutional decisions are often left 
to the discretion of the founder, and vary greatly between institutions. The complex, ambiguous, 
provisions  on  physical  assets  also  frequently  prevent  private  institutions  from  autonomous 
control  of  their  assets.  Here,  the  government  must  approve  both  the  creation  of  private 
institutions, as well as the delivery of all degree programmes.  

1.2  Key Higher Education Stakeholders 

Although  the  Ministry  of  Science,  Technology  and  Higher  Education  is  the  key  body  with 
respect  to  Portuguese  higher  education,  a  number  of  agencies  and  groups  also  exist  as  key 
stakeholders. 

In  general,  any  laws  passed  by  Parliament  concerning  higher  education  are  subject  to  a 
systematic process of consultation and debate, bringing together a variety of groups, such as the 
National Education Council, the Council of Portuguese University Rectors (Conselho de Reitores 
das  Universidades  Portuguesas  –  CRUP),  the  Portuguese  Polytechnics  Coordinating  Council 
(Conselho  Coordenador  dos  Institutos  Superiores  Politécnicos  –  CCISP),  and  the  Portuguese 
Association of Private Higher Education (Associação Portuguesa do Ensino Superior Privado – 
APESP). 

At the institutional level, each Portuguese university and polytechnic possesses a student union, 
which is designed to promote and defend the students’ position, and deals both with institutions 

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as well as State-level policy discussions. The largest and most vocal Portuguese student union is 
the  Association  of  Students  of  Higher  Technical  Institutions  (Associação  dos  Estudantes  do 
Instituto  Superior  Técnco  –  AEIST),  while  the  longest-serving  student  union  is  the  Coimbra 
Academic  Association  (Associação  Académica  de  Coimbra  –founded  in  1887).  Beyond  these 
student unions present at policy negotiations, the government also enlists input from a variety of 
expert educational consultants. 

1.3  How Governments Fund Institutions 

Historically,  the  Portuguese  government  has  heavily  subsidised  its  public  higher  education 
system. With respect to the funding structure, the state’s higher education budget includes three 
funding envelopes: for teaching (salaries and other expenses), for research and development, and 
for  capital  expenditures.  Originally  developed  in  1986,  funding  for  teaching  is  based  on  a 
formula that, for several decades, relied predominantly on inputs. Beginning in 2006, however, 
the  Portuguese  government  altered  the  Teaching  funding  formula  to  include  performance 
measures of institutional quality and efficiency. Currently, the expanded teaching budget formula 
accounts for measures of ‘qualification of teaching staff’ (measured by the “portion of PhDs out 
of  the  total  number  of  teachers  of  each  institution”),  graduation  rates,  and  various  other 
institutional  characteristics.  The  new  formula  does  not  calculate  absolute  budget  values,  but 
rather allocates a financial ceiling thus avoiding hard cuts to a calculated value.  

Research  funding  for  Science  and  Technology  is  allocated  through  a  combination  of  core 
funding  and  a  competitive  system  wherein  monies  are  provided  for  individual  projects  via 
scholarships  or  prizes.  Capital  funding  is  dependent  on  Ministry  approval  and  the  Ministry 
sanctioning an institution’s development plan. Beyond these funding envelopes, the Portuguese 
government  also  provides  direct  and  indirect  funding  to  students,  through  loans,  grants  and 
scholarships, and accommodation allowances. 

1.4  History of Cost-Sharing 

The  development  of  cost-sharing  measures  in  Portuguese  higher  education  is  linked  to  the 
growth of Portugal’s higher education sector, writ large. Into to the mid-1970s, Portugal had one 
of the lowest higher education enrolment rates in the industrialised world. Over the next several 
decades,  however,  the  higher  education  sector  expanded  rapidly,  with  enrolments  growing  by 
357%  between  the  1980s  and  2000s.This  rapid  expansion  involved  a  substantial  government 
investment; in the first ten years of this rapid growth (1980-1990), higher education management 
budgets grew by 877%.  

Prior  to  the  1990s,  universities  in  Portugal  did  not  charge  significant  fees  (though  a  mainly 
symbolic charge of about 5 euros existed), and were funded almost entirely from public sources. 
However,  during  the  mid-1980s,  Portuguese  politicians  began  advocating  an  increased  private 
sector  role  in  higher  education,  seeing  tuition  fees  as  an  opportunity  to  allow  continued 
expansion of enrolment, at minimal public cost. Subsequently, the introduction of tuition fees in 

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1992,  reaffirmed  in  1994,  saw  students  and  families  begin  to  pay  a  proportion  of  the  costs  of 
education. 

The  introduction  of  fees  in  1992  was  meant  to  assist  in  expanding  institutional  capacity 
following  a  decade  in  which  student  numbers  increased  dramatically.  The  law  was  written  in 
such a way that fees were initially to equal 12.5% of the overall budget, a figure which would 
increase in stages until it reached 25%. In 1996, the socialist government which had been elected 
the previous year suspended the tuition law, which led to fees in public universities returning to 
their  previous  nominal  levels  (roughly  6  euros  per  year)  for  one  year.  The  following  year,  it 
introduced a law which tied fees to the monthly minimum wage (at the time, about 283 euros). In 
2003, the current system of maxima and minima was introduced – the minimum fee is 1.3 times 
the minimum monthly wage and the maximum fee is inflation-linked to the level of tuition set in 
a law dating from 1941. 

Since the passage of this 2003 tuition law, institutions’ tuition fees have been expressed in terms 
of minimum and maximum fees. In 2008, the lowest tuition fee was 524 euros per year, while the 
highest was 950 euros. This tuition figure has continued to increase, and, naturally, institutions 
have tended to prefer charging the maximum amount, thus generating more income. As of 2010, 
the average tuition fee at Portuguese public HEIs was approximately 950-1,250 euros, but there 
is no official enrolment-weighted ‘average’ tuition. The situation is slightly different at  private 
higher education institutions. There, tuition fees vary greatly from university to university, and 
are paid on a monthly basis. 

Overall,  changes  in  tuition  fees  have  shifted  the  ratio  of  public  and private  funding  for  higher 
education. In 1995, for instance, nearly 99% of educational funding came from public sources; 
one  decade  later  the  percentage  of  public  institution  funding  has  shifted,  with  public  sources 
comprising roughly 70% of funding, and private sources contributing the remaining 30%. 

On the public side of the cost-sharing balance, the government provides both direct and indirect 
mechanisms  to  support  students  at  public  and  private  institutions.  For  nearly  25%  of  students 
who meet needs-based criteria, the government provides means-tested grants for living expenses 
and  tuition  fees  (2008  data  demonstrate  that  grants  can  range  from  40  euros  to  400  euros  per 
month. The government also provides ‘needy’ students with financial provisions for lodging and 
subsidised food. 

In 2007, the Portuguese government also instituted a student loan system. Aimed to benefit all 
higher  education  students,  the  loans  range  from  1,000  euros  to  5,000  euros  per  year,  with  a 
maximum  of 25,000  euros, at  a  fixed interest  rate  determined by  the  Euro  Interest  Rate  Swap, 
plus  a  maximum  spread  of  1%  -  though  this  can  be  reduced  if  a  student  gets  high  marks;  by 
0.35% for students who attain a yearly average of 70%, and by 0.8% if students attain a yearly 
average of 80% or better. 

Students  are  responsible  for  repaying  the  loan  principal  within  ten  years  of  graduation,  plus  a 
grace period of one year. Banks provide loans, and are required to acquire shares in one of three 
mutual  guarantee  companies  in an  amount  that is  equal to  0.5%  of the  total  loan  guarantee,  in 

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return  for  the  guarantee  that  the  company  provides.  For  their  part,  the  government  guarantees 
10% of the bank loan value.  

With respect to usage, by May 2008, more than 3,000 loans (with a total value of 33.7 million 
euros)  had  been  contracted,  with  60%  of  users  at  public  institutions,  and  40%  at  private 
institutions.  This,  however,  represents  less  than  1%  of  students  eligible  to  receive  these 
educational  loans.  The  Portuguese  government  is  hoping  to  increase  the  number  of  students 
taking  loans  per  year  to  25%.  At  the  same  time,  the  government  has  considered  the  idea  of 
altering the current (conventional) loan system, for a new, ‘hybrid’ student loan structure, as the 
country’s  (and  world’s)  economic  circumstances  hints  towards  future  critical  periods,  with 
graduates  potentially  taking  longer  to  become  economically  active,  with  potentially  longer 
periods of unemployment. 

1.5  History of Enrolment  

As  noted  earlier,  the  big  jump  in  higher  education  enrolments  really  occurred  in  the  1980s, 
before the period under consideration in this study. By 1995, enrolments overall were at roughly 
310,000 students, with just over 36% of students enrolled in private institutions. Over the next 
six  years,  enrolments  in  public  institutions  rose  by  nearly  50%  to  290,000  (two-thirds  of  this 
growth  was  in  the  polytechnic  sector),  while  private  institutions  saw  their  enrolments  stay 
relatively constant between 110,000 and 120,000 (see Figure 1.1). Overall, enrolments touched 
400,000  in  2001.  However,  from  2001  to  2006  a  very  different  situation  occurred,  with 
enrolments in both sectors falling (by 5% in the public sector and 18% in the private sector)  – 
resulting  in  an  overall  drop  in  enrolment  of  approximately  8%.  It  was  at  this  point  that  the 
government intervened to allow adult students (i.e. over 23) to access undergraduate studies, and 
this  in  part  accounted  for  the  upswing  in  enrolments  that  followed,  as  overall  enrolments 
regained  the  400,000  level.  However,  the  recovery  occurred  entirely  in  public  institutions,  as 
private  institutions  continued  to  lose  enrolments  through  the  period.  By  2010,  only  22%  of 
enrolments were in private universities. 

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Figure 1.1: Total undergraduate enrolment by sector (1995-2010) 

450 000
400 000
350 000
300 000
250 000
200 000
150 000
100 000
50 000
0

5
9
9
1

6
9
9
1

7
9
9
1

8
9
9
1

9
9
9
1

0
0
0
2

1
0
0
2

2
0
0
2

3
0
0
2

4
0
0
2

5
0
0
2

6
0
0
2

7
0
0
2

8
0
0
2

9
0
0
2

0
1
0
2

Public

Private

Total

Source: Direção-geral de Estatísticas da Educação e Ciência. 

Figure 1.2 shows the participation rates for the ‘best four years’ (that is, the four age-years with 
the highest participation rates, which in Portugal is 19-22). This shows quite a different picture 
from  Figure  1.1.  Instead  of  a  decline  in  the  early  2000s,  we  see  a  more-or-less  straight  line, 
indicating that participation rates – as distinct from enrolments- never went through a decline in 
the  early  2000s.  The  decline  in  enrolments  was  thus  mainly  a  demographic  issue,  a  result  of 
stable  participation  rates  and  a  declining  youth  cohort.  After  2005,  cohort  sizes  continued  to 
decrease, but participation rates began to increase (and indeed, the size of the increase suggests 
that  the  2006  decision  to  begin  admitting  students  over  23  was  not  the  main  reason  for  the 
reversal in student numbers). 

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Figure1.2: 'Best four years’ participation rates (1995-2010) 

40%

35%

30%

25%

20%

15%

10%

5%

0%

0
0
0
2

1
0
0
2

2
0
0
2

3
0
0
2

4
0
0
2

5
0
0
2

6
0
0
2

7
0
0
2

8
0
0
2

9
0
0
2

0
1
0
2

Note: Rates are for the four age years when entry is highest: 19 to 22. 
Source: Direção-geral de Estatísticas da Educação e Ciência, Instituto Nacional de Estatística, owncalculations. 

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2.  HYPOTHESIS A: AS PRIVATE FUNDING INCREASES, 

INSTITUTIONAL REVENUE INCREASES  

This  chapter  looks  at  data  relevant  to  Hypothesis  A,  which  states  that  as  private  funding 
increases,  institutional  revenue  increases,  but  only  if  public  funding  remains  constant.  That 
means that it will examine whether: 

 
 
 

there has been an increase in private funding 
there has been a concurrent change to public funding 
there has been a total increase in funding and how this is related to changes in private and 
public revenues. 

Changes  in institutional  funding  will  be  considered  both  in  terms  of  total  institutional  revenue 
and relative to the number of students. 

2.1  Changes in Institutional Revenues over Time 

The situation with regards to the availability of data on funding of higher education in Portugal is 
somewhat  challenging.  The  national  government  does  not  provide  data  on  the  full  period  of 
investigation  of  this  study.  There  are  merely  two  different  data  series  on  public  sources  of 
funding which, though not completely comparable, nevertheless appear to tell roughly the same 
story.  For  private  institutions,  which  are  mostly  financed  through  tuition  fees,  estimates  of 
average tuition fees can be multiplied by their enrolments. However, estimates of tuition fees are 
themselves mostly imputed because the government does not collect statistics on private tuition 
and there are only three observations developed by independent researchers (for 1995, 2005 and 
2010). The following section is based on a dataset created on the basis of the above mentioned 
sources. The dataset has been cross-referenced with data Portugal provides to the OECD (which 
is less complete than this dataset) and the two essentially correspond with one another; however, 
the reliability of this finance dataset is limited and does not match the quality of data in the other 
papers in this series. Readers should keep this caveat regarding data quality in mind. 

Figure 2.1 shows the evolution of funding by source, in real  2011 euros. Income from students 
has been relatively flat over the period in question. This is because increases in tuition fees and 
increases in the number of students have both been relatively mild, and have been offset to some 
extent  by  students  switching  from  expensive  private  institutions to  less  expensive  public  ones. 
Public funding increased significantly – by nearly 70% - in the period from 1995 to 2001, but has 
remained stagnant in real terms since then. ‘Other’ income fell significantly in the early 2000s – 
it is unclear why this might be the case (though a change in accounting procedure with respect to 
accounting  classifications  is  possible  –  some  of  the  ‘other’  revenue  may  in  fact  have  been 
income from government). 

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Figure 2.1: Higher education funding by source, in euros (1995-2010) 

1 400 000 000

1 200 000 000

1 000 000 000

800 000 000

600 000 000

400 000 000

200 000 000

0

5
9
9
1

6
9
9
1

7
9
9
1

8
9
9
1

9
9
9
1

0
0
0
2

1
0
0
2

2
0
0
2

3
0
0
2

4
0
0
2

5
0
0
2

6
0
0
2

7
0
0
2

8
0
0
2

9
0
0
2

0
1
0
2

Government

Students

Other

Note: Constant prices (2011). 
Source: DGESup, GPEARI, OECD, Direção-geral de Estatísticas da Educação e Ciência, own calculations. 

Figure 2.2 aggregates the individual spending levels into a single graph. In real terms, funding hit 
a peak of a little over 2 billion euros per year in 2001. The major shift in funding between 1995 
and 2005 was the increase in the percentage of funding which came directly from government; 
this rose from about 54% to 60%. The student share started at 32% in1995, but fell to 22% the 
following year due to the temporary, one-year elimination of tuition at public institutions. Since 
then, the student share has very gradually risen to its former levels, and in 2010 stood at 31%. 

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Figure 2.2: Aggregate higher education funding, in euros (1995-2010) 

2 500 000 000

2 000 000 000

1 500 000 000

1 000 000 000

500 000 000

0

5
9
9
1

6
9
9
1

7
9
9
1

8
9
9
1

9
9
9
1

0
0
0
2

1
0
0
2

2
0
0
2

3
0
0
2

4
0
0
2

5
0
0
2

6
0
0
2

7
0
0
2

8
0
0
2

9
0
0
2

0
1
0
2

Government

Students

Other

Note: Constant prices (2011). 
Source: DGESup, GPEARI, OECD, Direção-geral de Estatísticas da Educação e Ciência, own calculations. 

Private  universities  are  funded  almost  entirely  through  tuition  fees  (in  fact,  many  do  generate 
some income through other activities, but no data are available on this). Though their enrolments 
are down, tuition has risen to compensate, as shown in Figure 2.3. As a result, the total income of 
private  universities  in  2010  was  equal  to  16%  of  the  entire  higher  education budget  –  roughly 
what it was in 1995. 

Figure 2.3: Income of private HEIs as a percentage of total HEI income (1995-
2010) 

20%

15%

10%

5%

0%

5
9
9
1

6
9
9
1

7
9
9
1

8
9
9
1

9
9
9
1

0
0
0
2

1
0
0
2

2
0
0
2

3
0
0
2

4
0
0
2

5
0
0
2

6
0
0
2

7
0
0
2

8
0
0
2

9
0
0
2

0
1
0
2

Source: DGESup, GPEARI, OECD, Direção-geral de Estatísticas da Educação e Ciência, own calculations. 

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Figure 2.4 shows the same data in a slightly different way, by displaying university funding by 
source as a percentage of Gross Domestic Product (GDP). This graph looks somewhat different 
than Figure 2.2, which looked just at real revenue.  Specifically, the growth in the period 1995-
2001 turns out to have been driven largely by increases in GDP. Taking economic growth into 
account, there was very little growth in higher education expenditure over our period; indeed, the 
stagnation in real funding means that funding as a percentage of GDP has been eroding slowly 
for almost a decade. 

Figure 2.4: Higher education funding by source as a percentage of GDP (1995-
2010) 

1,60%

1,40%

1,20%

1,00%

0,80%

0,60%

0,40%

0,20%

0,00%

5
9
9
1

6
9
9
1

7
9
9
1

8
9
9
1

9
9
9
1

0
0
0
2

1
0
0
2

2
0
0
2

3
0
0
2

4
0
0
2

5
0
0
2

6
0
0
2

7
0
0
2

8
0
0
2

9
0
0
2

0
1
0
2

Government

Students

Other

Source: DGESup, GPEARI, OECD, Direção-geral de Estatísticas da Educação e Ciência, own calculations. 

Finally, we can look at revenue per student. Figure 2.5 tells a story not dissimilar to that in 2.4 – 
a rise before 2001, followed by slow erosion thereafter. Peak government spending per student 
was  in  2006;  the  enrolment  surge  since  then  has  outstripped  the  government’s  ability  (or 
willingness)  to  pay.  Income-per-student  increased  significantly  after  the  2003  policy  changes, 
but has remained constant since then. 

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Figure 2.5: Income per student by source (1995-2010) 

5 000
4 500
4 000
3 500
3 000
2 500
2 000
1 500
1 000
500
0

5
9
9
1

6
9
9
1

7
9
9
1

8
9
9
1

9
9
9
1

0
0
0
2

1
0
0
2

2
0
0
2

3
0
0
2

4
0
0
2

5
0
0
2

6
0
0
2

7
0
0
2

8
0
0
2

9
0
0
2

0
1
0
2

Government

Students

Other

Note: Constant prices (2011). 
Source: DGESup, GPEARI, OECD, Direção-geral de Estatísticas da Educação e Ciência, own calculations. 

Figure 2.6 disaggregates the data in Figure 5.5 to show how funding-per-student has evolved in 
the  public  and  private  sectors.  Even  though  enrolment  fell  at  private  institutions,  the  fact  that 
tuition  was  rising  meant  that  per-student  income  was  rising.  Meanwhile,  because  government 
and ‘other’ income were falling at public institutions, their per-student income was falling from 
as early as 1998. The long-term trend is therefore for per-student funding in the two sectors to 
converge. In 1995, per-student funding in the private sector was less than 50% that in the public 
sector; but by 2010 that figure had risen to just over 70%. 

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Figure 2.6: Income per student by sector (1995-2010) 

7 000

6 000

5 000

4 000

3 000

2 000

1 000

0

5
9
9
1

6
9
9
1

7
9
9
1

8
9
9
1

9
9
9
1

0
0
0
2

1
0
0
2

2
0
0
2

3
0
0
2

4
0
0
2

5
0
0
2

6
0
0
2

7
0
0
2

8
0
0
2

9
0
0
2

0
1
0
2

Public

Private

Note: Constant prices (2011). 
Source: DGESup, GPEARI, OECD, Direção-geral de Estatísticas da Educação e Ciência, own calculations. 

2.2  Institutional Expenditures 

The  previous  section  showed  that  institutional  income  first  rose  and  then  stagnated  during  the 
period under review. This section explores how that revenue was used. 

Unfortunately,  there  is  not  much  in  the  way  of  available  data  on  spending  in  Portuguese 
universities.  What  can  be  done,  however,  is  plotting  changes  in  students-per-academic  staff 
ratios,  which  provides  a  rough  indication  of  the  kinds  of  changes  in  study  conditions  facing 
students.  Figure  2.7  shows  income-per-student  and  students-per-academic  staff  ratios  at  public 
institutions  from  2001-2010,  a  period  when  per-student  funding  was  dropping  consistently. 
Rather remarkably, even though per-student funding in public institutions dropped by a full 20%, 
the students-per-academic staff ratio in 2010 was essentially the same as it was in 2001, at a little 
under  12:1.  This  implies  either  that  academic  staff’s  pay  lagged  badly  in  this  period,  or  that 
institutions cut back significantly on non-instructional expenditures in this period. 

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Figure 2.7: Income per student (in euros) and students-per-academic staff ratios 
at public HEIs (2001-2010) 

 12,5

 12,0

 11,5

 11,0

 10,5

 10,0

 9,5

7 000

6 000

5 000

4 000

3 000

2 000

1 000

0

1
0
0
2

2
0
0
2

3
0
0
2

4
0
0
2

5
0
0
2

6
0
0
2

7
0
0
2

8
0
0
2

9
0
0
2

0
1
0
2

Students-per-academic staff ratio (left axis) 
Student:teacher ratio (left axis)

euros/student (right-axis)

Note: Constant prices (2011). 
Source: DGESup, GPEARI, OECD, Direção-geral de Estatísticas da Educação e Ciência, author’s calculations. 

Figure  2.8  shows  the  same  data  for  private  universities.  Of  interest  here  is  that  private 
universities  are  able  to  maintain  students-per-academic  staff  ratios  below  those  of  public 
institutions  even  with  considerably  less  funding  per  student  (presumably  because  the 
programmes  they  offer  are  less  capital-intensive).  The  fall  in  the  students-per-staff  ratio  was 
caused  entirely  by  a  fall  in  the  number  of  students  rather  than  an  increase  in  the  number 
ofacademic staff. 

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Figure 2.8: Income per student (in euros) and students-per-academic staff ratios 
at private HEIs (2001-2010) 

 12,0

 10,0

 8,0

 6,0

 4,0

 2,0

 -

4 000

3 500

3 000

2 500

2 000

1 500

1 000

500

0

1
0
0
2

2
0
0
2

3
0
0
2

4
0
0
2

5
0
0
2

6
0
0
2

7
0
0
2

8
0
0
2

9
0
0
2

0
1
0
2

Students-per-academic staff ratio (left axis) 
Student:teacher ratio (left axis)

euros/student (right-axis)

Note: Constant prices (2011). 
Source: DGESup, GPEARI, OECD, Direção-geral de Estatísticas da Educação e Ciência, own calculations.  

2.3  Evaluation 

This  section  posed  two  questions  at  the  outset:  “Did  cost-sharing  increase  total  funding?”  and 
“How was additional income spent”? The answer to the first question is somewhat indeterminate. 
Though  it  is  slightly  outside  our  period  of  study,  the  introduction  of  tuition  fees  was  clearly 
meant to be an additional element in public university funding, helping to pay for the expansion 
of university access. One might argue that the long-term stagnation of public funding after 2001 
(or,  indeed,  the  decline  in  per-student  spending  after  1998)  should  be  interpreted  as  a  delayed 
reaction to the introduction of fees – that is, that the introduction of fees in 1992 paved the way 
for  later declines in public spending. But then again, government’s refusal to countenance real 
increases in tuition after 2003 suggests that there is in fact a limited interest in burden-shifting. 
Thus, the answer to this question is that fees did indeed increase total funding, but not by very 
much. 

As  for  the  question  of  how  extra  money  was  spent,  it  seems  to  have  been  spent  on  faculty 
salaries. Overall, student-staff ratios have either stayed constant or improved despite declines in 
per-student funding, which is in marked contrast to most other countries in this study. 

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3.  HYPOTHESIS B: AS THE INCENTIVES TO EARN 

PRIVATE FUNDING INCREASE, INSTITUTIONS BECOME 
MORE RESPONSIVE TO STUDENT DEMAND 

This  chapter  looks  at  data  relevant  to  Hypothesis  B,  which  states  that  as  incentives  to  earn 
private  funding  increase,  institutions  become  more  responsive  to  user  demand.  However,  this 
expected  effect  is  conditional  on  the  attractiveness  of  these  private  revenues  and  whether 
increasing these revenues has trade-off effects for the overall behaviour or prestige of HEIs.  

Various aspects of responsiveness will be examined, including  changes to provision, enrolment 
and the connection between HEIs and users. If no changes to responsiveness are visible, this is 
likely  related  to  the  incentive  structure  present  in  the  higher  education  system,  which  might 
favour other behaviours such as the maximisation of public over private funding. 

3.1  Enrolment by Discipline  

One  hypothesis  about  the  effects  of  fees  is  that  they  make  institutions  desirous  of  increasing 
revenues  by  focussing  on programmes  that are  popular  or  lower-cost  courses  (these  tend  to be 
‘soft’  disciplines,  paper  and  pencil  subjects-areas).  This  may  lead  to  overall  changes  in  the 
discipline profile of a national higher education system.  

Figure  3.1  shows  changes  in  shares  of  enrolment  by  field  of  study  at  public  institutions  in 
Portugal. The most significant shift after 2000 is the drop in the number of students studying in 
the field of education. The reason for this is demographic; there are simply fewer young people 
to  teach  and  hence  less  demand  for  teachers.  Presumably  for  similar  reasons,  over  the  same 
period there  was  an increase  in  the  number  of  students  studying  in  fields related  to  health  and 
welfare. Apart from that, there was little change. 

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Figure 3.1: Distribution of new enrolments at public universities by field of study 
(1995-2010) 

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

Services

Health & Welfare

Agriculture

Engineering

Science & Math

Soc Sci, Business, Law

Humanities/Arts

Education

1995

2000

2005

2010

Source: DGESup. 

The pattern of new enrolments was very similar at private universities, as Figure 3.2 shows. The 
pattern for education (a bump in 2000, followed by a decline thereafter) and health (large gains 
after 2000) is precisely what we see in the data for public institutions, which suggest that these 
fields  were  generally  in  demand  at  those  times.  What  is  more  striking  is  how  much  more 
important  those  swings  are  in  the  private  sector  than  in  the  public  sector,  which  suggests  a 
greater  degree  of  flexibility  in  opening  and  closing  programmes.  Social  science,  business  and 
law programmes, which made up almost 60% of new enrolments in 1995, had shrunk to just over 
40% by 2005 – and this, as one will recall from Chapter 1, is on a shrinking base. 

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Figure 3.2: Distribution of new enrolments at private universities by field of 
study (1995-2010) 

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

Services

Health & Welfare

Engineering

Science & Math

Soc Sci, Business, Law

Humanities/Arts

Education

1995

2000

2005

2010

Source: DGESup. 

3.2  Enrolment Patterns by Mode  

In  some  countries,  the  fee  structure  may  make  it  advantageous  for  institutions  to  increase  the 
number of part-time students. One hypothesis about the effects of fee-sharing is that it may lead 
to a shift of students from one mode of study to another.  

This  hypothesis  is  not  testable  in  Portugal  because  the  country  does  not  report  enrolment 
statistics  by  full-  and  part-time.  Many  professional  Master  programmes  are  also  held  in  the 
evenings in order to accommodate the schedules of working students. It is understood, however, 
that the post 2005 reforms that permitted over-23 year-olds to enter universities as new students 
resulted  in  a  class  of  students  who  tend  to  study  on  a  part-time  basis.  The  number  of  such 
students  does  not  greatly  exceed  10,000  –  assuming  that  all  of  them  were  studying  in  such  a 
manner,  that  would  imply  that  they  compose  about  5%  of  undergraduates.  There  is  thus  some 
reason  to  suggest  here  that  the  lure  of  tuition  money  has  led  to  a  change  in  the  study  mode, 
though it would be a relatively modest change. 

3.3  Enrolment Composition  

Another  hypothesis  about  fees  is  that  they  will  encourage  institutions  to  be  more  active  in 
selecting students who are associated  with higher revenue streams.  In many countries, this has 
led  to  an  increase  in  the  number  of  international  students  studying  in-country.  However,  this 
hypothesis  only  makes  sense  if  universities  can  actually  earn  extra  revenue  from  international 

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students. In Portugal, no law has been passed to permit universities to charge differential fees to 
foreign students and so they pay the same fee as domestic students. This is much lamented by 
university  rectors  in  the  country  as  it  has  meant  that  there  has  been  little  incentive  to  chase 
students,  and  Brazilian  universities  have  leapt  ahead  of  Portuguese  ones  in  terms  of  attracting 
students from places like  Angola and Mozambique. As  Figure 3.3 shows, international student 
enrolment has remained relatively marginal over the period in question. 

Figure 3.3: International student enrolment as a percentage of total headcount 
(2000-2010) 

6,0%

5,0%

4,0%

3,0%

2,0%

1,0%

0,0%

0
0
0
2

1
0
0
2

2
0
0
2

3
0
0
2

4
0
0
2

5
0
0
2

6
0
0
2

7
0
0
2

8
0
0
2

9
0
0
2

0
1
0
2

Source: DGESup. 

3.4  Diversity of Provision  

Another  way  in  which  cost-sharing  can  affect  institutional  behavior  is  in  the  way  it  creates 
incentives  for  new  universities  and  new  programmes  to  proliferate  and  diversify.  Figure  3.4 
shows  the  changes  in  distribution  in  institutions.  No  programme-level  data  were  available 
throughout the period which would allow us to comment on this; though interviewees indicated 
that  in  the  private  universities  at  least,  there  is  considerable  creation  and  elimination  of 
programmes in line with student demand. Institutional-level data do however exist. The number 
of public universities and ‘university institutes’ (e.g. military university, naval university) stayed 
constant during the period in question, while the number of polytechnics rose by two in the early 
1990s  and  then  stayed  constant.  The  number  of  private  institutions,  surprisingly,  rose  even  as 
enrolments  began  to  fall  in  the  1990s,  meaning  that  average  institutional  enrolment  fell 
enormously during this period. There is no obvious link between these numbers and the levels of 
fees charged. 

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Figure 3.4: Number of HEIs by sector (1991-2011) 

60

50

40

30

20

10

0

1
9
9
1

2
9
9
1

3
9
9
1

4
9
9
1

5
9
9
1

6
9
9
1

7
9
9
1

8
9
9
1

9
9
9
1

0
0
0
2

1
0
0
2

2
0
0
2

3
0
0
2

4
0
0
2

5
0
0
2

6
0
0
2

7
0
0
2

8
0
0
2

9
0
0
2

0
1
0
2

1
1
0
2

Public University

Public Polytechnics

Private Polytechnics

Public "University institutions"

Private Universities

Source: Direção-geral de Estatísticas da Educação e Ciência. 

3.5  Outreach Practices  

According to interviews conducted for this study, there was a period in which marketing budgets 
did  increase  significantly;  namely,  the  period  in  the  mid-2000s  when  the  demographic  change 
was  beginning  and  enrolments  were  decreasing.  At  that time, institutions were  seeking  market 
share in face of an overall decline  – and, later, market share from a new class of students after 
the  2006  law  allowed  over-23s  to  be  allowed  to  enter  universities  as  adult  students.  Most 
observers  indicate  that this kind  of marketing  was, however,  a  casualty  of  the  recent  period  of 
Portugal’s austerity measures. 

During  the  period  in  question,  there  has  been  one  marked  change  in  the  legal  form  of 
governance,  which  is  to  require  student  participation  in  governing  boards.  This  government 
decision does not appear to have been a measure taken directly in relation to cost-sharing, though 
presumably  the  argument  that  as  contributors  to  the  budget  students  should  have  some  say  in 
management  would  have  had  rhetorical  force.  In  any  case,  this  came  about  as  the  result  of  a 
governmental decision, rather than because of a change in behavior by institutions. 

Where institutional behavior does seem to have changed somewhat is with respect to outreach to 
institutions. Observes indicate that over the past ten years there has been a marked increase in the 
interest  of  universities  in  reaching  out  at  the  level  of  the  individual  faculty  or  programme  to 
employers to understand their needs better, and to revise curricula in light of their input. 

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3.6  Quality and Relevance  

Portugal does not have a history of using large-scale surveys on student satisfaction, and hence 
there are no time-series data with respect to changes in student satisfaction. There is however one 
recent multi-campus study performed by Mainardes, Alves  & Raposo (2013) that gave at least 
some insight into the level of satisfaction on campus. Using a 5-point likert scale where 1=bad 
and 5=good, 1,669 students from 11 institutions rated their university experiences. As in many 
countries,  the  average  results  indicated  that  students  were  satisfied  but  not  thrilled  with  their 
experiences.  Generally,  they  were  more  satisfied  than  not  with  their  overall  experiences,  but 
there is some significant dissatisfaction with respect to the link between their education and the 
labour  market  and  the  degree  to  which  classes  are  seen  as  ‘practical’  rather  than  theoretical. 
Selected results are shown below in Figure 3.5. 

Figure 3.5: Selected Student Satisfaction Ratings (2011) 

3,74 

3,69 

3,65 

3,14 

2,86 

5

4,5

4

3,5

3

2,5

2

1,5

1

0,5

0

New life
experiences

Availability of
teaching staff

Overall

Links with
Employment Market

Practical classes

Source: Mainardes, Alves & Raposo (2013). 

There  are  unfortunately  little  strong  data  about  employers'  changing  levels  of  satisfaction  over 
time. Interviews with employers revealed that companies do acknowledge a significant increase 
in outreach at the programme level  from institutions, and an improved willingness to focus on 
employability outcomes. For the most part, this is attributed to the financial crisis rather than to 
the arrival of cost-sharing. 

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3.7  Evaluation 

The broad question that was tested in this section was “have institutional strategies changed to 
maximise revenue from private sources”. This was done by looking at six sub-hypotheses, which 
will be briefly reviewed here before attempting to assess whether there was an overall effect. 

The first sub-hypothesis related to whether the discipline profile  of HEIs  in a country changed 
(e.g., increasing offers in paper-and-pencil subjects and fewer provisions in expensive lab-based 
areas, or focus on more popular subjects). The answer is that there have been some changes in 
disciplinary  profiles  –  more  so  in  private  universities  than  in  public  ones  –  but  there  is  no 
obvious  relationship  with  cost-sharing.  The  expansion  of  demand  was  primarily  in  the  health 
fields and occurred largely at the expense of the fields of education (in public universities) and 
general  social  science  and  business  courses  (in  private  ones).  This  would  appear  to  be  a 
straightforward  outcome  of  a  larger  demographic  shift  rather  than  because  of  shifting  due  to 
tuition fees, which are undifferentiated across programmes, at least in public institutions. 

The second sub-hypotheses relate to whether there had been any change in the modes of study, 
such as an increase in part-time provision, with the aim of increasing private revenue. This was 
largely untestable because of the way Portugal reports its student statistics. It would appear that 
there  has  been  some  small  change  in  this  at  the  margin,  driven  in  part  by  the  need  to 
accommodate new, older learners. 

The  third  sub-hypothesis  has  to  do  with  institutions  changing  in  enrolment  composition  to 
maximise  revenue,  such  as  by  recruiting  more  international  (non-domestic)  students  paying 
international  student  fees.  Because  international  students  cannot  be  charged  higher  fees,  this 
hypothesis  has  little  force  in  Portugal.  International  student  numbers  have  increased,  but  only 
slightly, and they have not resulted in extra revenues.  

The fourth sub-hypothesis relates to the degree of diversity in higher education providers, such 
as  more  private  institutions,  or  more  programmes  offered  by  public  institutions.  It  was 
impossibleto examine diversity at the programme level, though key informants generally noted 
that private-sector institutions at least were responsive to shifting demand and opened and closed 
programmes in accordance with external demand. At the institutional level, there has been very 
little  change  over  time  even  as  overall  enrolments  have  risen  and  fallen.  Indeed,  the  lack  of 
change is quite striking on the private side, with the total number of institutions staying constant 
even as enrolments have shrunk considerably. 

The fifth sub-hypothesis has to do with increased outreach – did the need to gain tuition revenue 
change  institutional  behavior  with  respect  to  relations  with  students  and  employers?  This  is  a 
difficult  question  to  answer:  there  has  been  increased  student  representation  on  governing 
boards,  though  since  this  came  about  through  government  legislation  rather  than  institutional 
decision it is difficult to conclude that this represents a change in institutional behavior. As far as 
outreach to industry goes, key informants do indicate some improvement in this area, but tend to 
attribute it to a crisis in graduate employment rather than to cost-sharing. 

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The  sixth  sub-hypothesis  has  to  do  with  quality  and  relevance.  Did  students  and  graduates 
become more satisfied with the options available to them? Did graduates become more satisfied 
with  their  employment  outcomes?  And  were  employers  satisfied  with  quality  of  recent 
graduates? Unfortunately, the answer to these questions must be tentative due to such a lack of 
evidence. There is no quantitative data whatsoever on employers, and only a single snapshot of 
students’ views, which prevents us from looking at changes over time.  

Concerning the summative question- have institutional strategies changed to maximise revenue 
from private sources? - the answer is mixed: there have been some changes in behavior, but few 
of  them  seem  to  be  directly  related  to  the  issue  of  tuition  fees  and  cost-sharing.  In  part,  this 
seems  to  have  to  do  with  the  restrictions  which  institutions  face;  for  instance,  they  have 
displayed no particularly entrepreneurial effort to attract international students because they are 
not permitted to charge them on a differential basis from domestic students.  

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4.  HYPOTHESIS C: INCREASING PRIVATE FUNDING HAS 

A NEGATIVE EFFECT ON PARTICIPATION 

This  chapter  looks  at  data  relevant  to  Hypothesis  C,  which  states  that  as  private  funding 
increases,  costs  increase  to  students  and  their  families,  which  in  turn  may  have  an  impact  on 
quantitative student demand and on the composition of the student body.  

In order to assess this, it is important to look at:  

 

the real costs to students, including direct and indirect  support provided by the state, which 
may discount the gross costs 

  how tuition fees are organised: Who pays and who does not pay? When do you pay  – as a 

 

student or as a ‘successful’ graduate (with a well-earning job)? 
the  overall  trend  of  participation  rates  in  the  country  in  question,  i.e.  expanding,  stable  or 
contracting? 

4.1  Students’ Costs for Higher Education  

There are, effectively, two tuition fee regimes running in Portugal. Fees  for undergraduate and 
research-based Master degrees in public institutions are tightly under government control and are 
tied to inflation. Governments set minimum and maximum fees for programmes at these levels, 
and  institutions  can  charge  what  they  wish  within  this  range.  Universities,  particularly  the 
prestigious ones such as the University of Lisbon, tend to place their fees at the high end of the 
scale while polytechnics tend to put them at the low  end. Private universities, and professional 
Master and doctoral programmes at public universities, are free to charge market rates for their 
courses.  

Portugal introduced tuition fees in a significant way in 1992. In 1996, government suspended the 
tuition  law,  which  led  to  fees  in  public  universities  returning  to  their  previous  nominal  levels 
(roughly 6 euros per year) for one year. The following year, it introduced a law that tied fees to 
the  monthly  minimum  wage  (at  the  time,  about  283  euros).  In  2003,  the  current  system  of 
maxima and minima was introduced – the minimum fee is 1.3 times the minimum monthly wage 
and the maximum fee is inflation-linked to the level of tuition set in a law dating from 1941 (see 
also Section 1.4).  

Student Expenditures 

Figure 4.1 shows how these changing rules worked out in practice. In their initial phase, prior to 
the  1996  suspension  of  fees,  tuition  fees  were  about  600  euros  per  year.  When  fees  were  re-
instated in 1997 it was at a level about 30% less than where they had ben originally set – roughly 

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400  euros  per  year,  where  they  stayed  until  2003.  At  that  point,  the  minimum/maximum  fee 
system  was  adopted,  with  rather  more  students  paying  maximum  than  minimum.  In  the  eight 
years after this system was adopted, maximum tuition stayed very close to 1,000 euros (in real 
terms), while minimum tuition rose slightly from around 575 euros to about 630 euros per year. 

Figure 4.1: Student fees at public universities (1993-2011)  

1 200

1 000

800

600

400

200

0

3
9
9
1

4
9
9
1

5
9
9
1

6
9
9
1

7
9
9
1

8
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9
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1

0
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2
Minimum

2
0
0
2

5
0
0
2

3
4
0
0
0
0
2
2
Maximum

6
0
0
2

7
0
0
2

8
0
0
2

9
0
0
2

0
1
0
2

1
1
0
2

Note: Constant prices (2011). 
Source: Cerdeira, Patrocinio, Cabrito, Machado, & Brites (2012). 

There is no official collection of statistics on tuition at private institutions. However, there is data 
from three specific years collected by Cerdeira et al. (2012), and these data are shown in Figure 
4.2.  As  with  public  institutions,  tuition  is  higher  in  real  terms  than  it  was  in  the  mid-1990s, 
though the increase has not been quite as pronounced. In 1995, average tuition in private HEIs 
was 2,827 euros, a figure which by 2010 had reached 3,739 euros, implying an increase of about 
32% in real terms. 

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Figure 4.2: Student fees at private universities, in euros (1995-2010) 
3739 

4 000

2827 

3235 

3 500

3 000

2 500

2 000

1 500

1 000

500

0

1995

2005

2010

Note: Constant prices (2011). 
Source: Cerdeira et al. (2012). 

Fees are of course only one part of student costs. According to periodic data on overall student 
costs, tuition as a portion of overall costs was 24% among public university students in 2010 and 
48% among private institutions. Average accommodation costs for students were relatively low 
(under  1,000  euros  per  year),  primarily  because  most  students  chose  to  live  at  home.  ‘Other 
living costs’ – meaning money spent on everyday life – appears to be substantially higher among 
private university students than public ones (reflecting perhaps different economic backgrounds). 
It is notable, however, that in both sectors the amount for this decreased significantly between 
2005 and 2010, likely an effect of the economic crisis. 

Table 4.1: Total annual student costs, in euros 

Public HEI students 

Private HEI students 

1995 

652 

823 

530 

2005 

1015 

426 

934 

2010 

1022 

349 

766 

1995 

2730 

1063 

289 

2005 

3124 

579 

470 

2010 

3610 

475 

385 

2902 

2685 

2201 

3888 

3782 

3100 

Fees* 

Books & other 
learning materials 

Accommodation 
costs 

All other living 
costs 

Note: *For Public: fees=maximum public university fees. Constant prices (2011). 
Source: Cerdeira, Cabrito, Patrocínio, Brites, & Machado (2011). 

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Student Assistance 

Grants 

Portugal  has  a  long-standing  system  of  income-based  non-repayable  assistance  which  serves 
approximately 17% of the student population. Figure 4.3 shows the average size of the grants by 
sector. It is unclear why the average grant size in private universities was so volatile in the late 
1990s – this was a period when relatively few grants were given to students in this  sector (less 
than 5,000 per year up to 1999), so it is possible that small numbers affect the total. Since 2002, 
the  average  grant  size  in  the  two  sectors  has been  converging,  so  that  at present  their  value  is 
about  2,000  euros  per  year.  This  would  not  cover  tuition  in  a  private  university,  but  it  would 
cover both tuition and textbooks with a bit left to spare at a public institution. 

Figure 4.3: Average size of grants, by sector, in euros (1995-2011) 

4 000

3 500

3 000

2 500

2 000

1 500

1 000

500

0

5
9
9
1

6
9
9
1

7
9
9
1

8
9
9
1

9
9
9
1

0
0
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2

1
0
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2

2
0
0
2

3
0
0
2

4
0
0
2

5
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2

6
0
0
2

7
0
0
2

8
0
0
2

9
0
0
2

0
1
0
2

1
1
0
2

Average Public

Average Private

Average Total

Note: *For Public: fees=maximum public university fees. Constant prices (2011). 
Source: DGESup, GPEARI, OECD, Direção-geral de Estatísticas da Educação e Ciência, Conselio de Reitores das 
Universidades Portugesas. 

Average  grant  size  has  stayed  relatively  constant  over  the  entire  period  in  question,  with  the 
value staying more or less between 1,500 euros and 2,000 euros per year. However, the number 
of  grant  recipients  has  more  than  doubled,  from  30,000  per  year  to  nearly  75,000  per  year,  as 
shown in Figure 4.4. Most of this growth occurred in the years leading up to 2001, when overall 
enrolment was still growing strongly. Over time, the percentage of students receiving grants has 
risen from 10% to 19%. 

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Figure 4.4: Total number of grants awarded and average grant size, in euros 
(1995-2011) 

80 000

70 000

60 000

50 000

40 000

30 000

20 000

10 000

0

2500

2000

1500

1000

500

0

5
9
9
1

6
9
9
1

7
9
9
1

8
9
9
1

9
9
9
1

0
0
0
2

1
0
0
2

2
0
0
2

3
0
0
2

4
0
0
2

5
0
0
2

6
0
0
2

7
0
0
2

8
0
0
2

9
0
0
2

0
1
0
2

1
1
0
2

Numberof Grants (left axis)

Average Grant (right axis)

Source:  DGESup,  GPEARI,  OECD,  Direção-geral  de  Estatísticas  da  Educação  e  Ciência,  Conselio  de  Reitores  das 
Universidades Portugesas. 

Loans  

Portugal has had a loan system in place since 2007. Under this programme, students may borrow 
between 1,000 euros and 5,000 euros per  year, up to a maximum of 25,000 euros for a 5 year 
course.  After  the  termination  of  studies,  there  is  a  12-month  holiday  on  the  repayment  of 
principal, though interest must be paid monthly. The interest rate is fixed for the length of the 
loan and is equal to the current rate of government borrowing plus 1% (though there is a merit 
bonus under which students with higher grades pay slightly lower rates of interest). The length of 
the  reimbursement  period  is  equal  to  twice  the  number  of  years  during  which  the  loan  was 
contracted. 

Take-up rates on these loans has been relatively small – in the first five years of the scheme, the 
average number of new borrowers was less than 4,000 per year, which suggests an overall take-
up  rate  of  around  2%.  Data  from  the  first  year  of  operation  indicate  that  roughly  40%  of  all 
borrowers were at private universities. Annual borrowing rates are impossible to calculate from 
official statistics, but they seem likely to be slightly larger in size than the grants (see above).  

Tax benefits 

Portugal has a system of tax benefits for parents of students which resembles that of Germany. 
All parents with children under 18 may deduct 40% of the monthly minimum wage from their 
income when filing their taxes; this privilege is extended to children under 25 provided they are 
enrolled in education. The government of Portugal does not publish statistics on the value of this 

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tax  benefit,  and  it  is  not  calculable  independently  because  as  a  deduction,  its  actual  value 
depends on each individual’s tax bracket (data which are also unavailable).  

Net costs to students 

Unfortunately,  in  calculating  net  costs,  the  data  limitations  described  above  prevent  us  from 
taking into account the effects of loans and tax benefits. Though the former is likely negligible 
because  of  low  take-up  rates,  the  latter  is  potentially  significant  because  it  is  available  to  all 
parents. With those caveats in mind, however, we can look at net costs over time. 

Figure 4.5 shows average net tuition costs – that is, average tuition fees minus average grants  – 
in both private and public universities. After 2003, the amounts of tuition for public universities 
are  the  maximum  fee;  in  practice  many  students  in  the  public  system  pay  somewhat  less  than 
this.  Private  institutional  tuition has been  imputed based  on  known  changes  between  1995-and 
2010. The ‘sticker’ tuition (i.e. the price students pay to attend higher education) is then reduced 
by  the  amount  of  grant  aid  averaged  across  all  students  –  including  those  who  do  not  receive 
grants. Although grants are only given to a minority of students, they are large enough to reduce 
net  tuition  costs  across  all  students  by  about  a  third.  The  data  shows  that  since  about  2003, 
average net tuition fees at public and private institutions has been headed in opposite directions. 
At private institutions, tuition fees have been rising, and grant assistance has not kept pace. At 
public  institutions,  tuition  fees  have  been  constant  in  real  terms  and  grants  have  grown,  thus 
leading to declining net tuition costs. 

Figure 4.5: Average net costs in public and private HEIs (1995-2011) 

 4 000
 3 500
 3 000
 2 500
 2 000
 1 500
 1 000
 500
 -
 (500)

5
9
9
1

6
9
9
1

7
9
9
1

8
9
9
1

9
9
9
1

0
0
0
2

1
0
0
2

2
0
0
2

3
0
0
2

4
0
0
2

5
0
0
2

6
0
0
2

7
0
0
2

8
0
0
2

9
0
0
2

0
1
0
2

1
1
0
2

Public

Private

All

Note: Net student costs are student fees minus average amount of grant assistance. Constant prices (2011). 
Source:  DGESup,  GPEARI,  OECD,  Direção-geral  de  Estatísticas  da  Educação  e  Ciência,  Conselio  de  Reitores  das 
Universidades Portugesas. 

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Relative earnings 

One  important  factor  to  consider  in  terms  of  access  is  how  returns  to  education  evolved  over 
time.  All  other  things  being  equal,  a  rise  in  relative  earnings  of  graduates  (that  is,  relative  to 
those of individuals without higher education) should exert upwards pressure on participation as 
it  makes  education  a  more  attractive  investment.  As  Figure  4.6  shows,  relative  earnings  were 
very high in Portugal, and stayed relatively constant over the period 1997-2005, after which they 
began to fall slightly, to end the period about 10% lower than they began. 

Figure 4.6: Relative earnings of higher education graduates (1997–2010) 

190

180

170

160

150

140

7
9
9
1

8
9
9
1

9
9
9
1

0
0
0
2

1
0
0
2

2
0
0
2

3
0
0
2

4
0
0
2

5
0
0
2

6
0
0
2

7
0
0
2

8
0
0
2

9
0
0
2

0
1
0
2

Note:  relative  earnings  indexed  to  the  earnings  of  persons  with  secondary  and  post-secondary  non-tertiary 
education=100. 
Source: OECD, Education at a Glance. 

Figure  4.7  shows  a  somewhat  crude  way  of  looking  at  whether  or  not  the  return  on  students’ 
investment  is  rising  or  falling  over  time.  The  solid  line  represents  the  earnings  premium 
described in Figure 4.6; the dotted line represents net average tuition. This is essentially the same 
data from Figure 4.5 except that it consists of a moving 3-year average, to simulate the costs of a 
full Bachelor degree. What Figure 4.7 shows is that the 2003 rise in tuition certainly reduced the 
return  on  investment  somewhat  (although  from  an  extraordinarily  high  base);  since  then, 
however, both fees and earnings premiums have been falling, keeping the return on investment 
roughly constant.  

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Figure 4.7: Relative earnings vs. net costs (1999 –2010) 

130

120

110

100

90

80

70

60

9
9
9
1

0
0
0
2

1
0
0
2

2
0
0
2

3
0
0
2

4
0
0
2

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0
2

6
0
0
2

7
0
0
2

8
0
0
2

9
0
0
2

0
1
0
2

Relative Earnings

Average Net Tuition

Note: Indexed to average earnings of a person with higher education and average net tuition in 1999 (=100). 
Source: OECD Education at a Glance, Cerdeira et al. (2012). 

4.2  Participation Rates  

A key question – perhaps the key question of this study – is whether or not the change in cost-
sharing and fees had any effect on participation. Figure 4.8 suggests strongly that they did not. 
The  general  trend  in  participation  has  been  uninterruptedly  upwards,  and  the  sharp  one-time 
increase in tuition fees did not alter participation rates at all. This does not mean that students are 
price-insensitive; the increasing gap in net fees between public and private institutions may well 
have been a contributing factor to the decreases in private university enrolment over our period 
of investigation. But these increases in fees have not, on the whole, had a demonstrable effect on 
access. 

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Figure 4.8: Participation and tuition fees (2000-2010) 

Source:  DGESup,  GPEARI,  OECD,  Direção-geral  de  Estatísticas  da  Educação  e  Ciência,  Conselio  de  Reitores  das 
Universidades Portugesas, Instituto Nacional de Estatística, own calculations. 

4.3  Composition of the Student Body  

Ethnicity  

In  many  countries,  the  prime  concern  about  raising  fees  is  the  effect  that  this  might  have  on 
ethnic minorities. However, because of the degree of homogeneity in the population, differences 
by  ethnicity  are  not  seen  as  a  significant  issue  in  Portugal  and  so  no data  are  collected  on  the 
subject. 

Gender 

The proportion of the university student body that is female rose in the early part of our period 
from 57% to 58%. After 2002, the proportion began to fall again, down to 54%. There are few 
parallels to this anywhere in Europe; in fact, over the comparable period only two other countries 
(Greece and Ireland) saw a fall in the female share of enrolments of anything like this magnitude. 
However,  a  link  to  changes  in  fees  would  be  hard  to  prove  –  most  of  the  fall  came  during  a 
period where fees were essentially frozen and net fees were in fact declining.  

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0%5%10%15%20%25%30%35%40% - 500 1,000 1,500 2,000 2,500 3,000 3,50020002001200220032004200520062007200820092010Tuition fees public HEIstuition fees private HEIsTuition fees (public and private)Participation rate (right axis) 
 
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Figure 4.9: Female share of overall enrolment (1998-2010) 

60
58
56
54
52
50
48
46
44
42
40

8
9
9
1

9
9
9
1

0
0
0
2

1
0
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2

2
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2

3
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4
0
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2

6
0
0
2

7
0
0
2

8
0
0
2

9
0
0
2

0
1
0
2

Source: Unesco Institute of Statistics. 

Socio-economic background 

There are no data that would allow a reasonable time series. There is, however, a snapshot from 
2005 about the distribution of students by institution type and income band. In Figure 4.10, ‘low-
income’  is  defined  as  less  than  780  euros  per  month  in  family  income,  and  upper  income  is 
defined as more than 2,660 euros per month. Unsurprisingly, with ranges like that, the majority 
of  student  enrolment at all  types  of  institution is  ‘middle-income.’  However,  what  Figure  4.10 
also shows is that public polytechnics – that is the least costly and least selective form of higher 
education –  tend to  have  students  from  the  poorest  backgrounds,  while  private  universities  are 
the most likely to draw from higher-income families. 

Figure 4.10: Shares of enrolment by income bracket, by type of HEI (2005) 

100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%

14% 

65% 

21% 

20% 

72% 

8% 

11% 

62% 

27% 

Public University

Public Polytechnic

Private

High-income

Middle-income

Low-income

15% 

66% 

19% 

Total

Source: Cerdeira (2008). 

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4.4  Completion Rates  

There does not appear to be any empirical data in Portugal that address this question.  

4.5  Evaluation 

The evaluation of the information presented in this chapter consists of answering four separate 
sets of questions.  

First, how have increases in private funding changed costs to students? The answer here is that 
over the period of investigation they have not increased very much at all; at public institutions, 
fee increases have been limited to inflation for nearly a decade; at private institutions they have 
risen at only  one or two points above inflation. Once an increasingly  generous grant system is 
taken into account, average net costs have, in fact, been dropping slightly at public institutions. 

The  second  question  here  is:  what  effect  does  an  increase  in  private  funding  have  on 
participation rates? The answer appears to be “none”. As fees at public institutions stayed flat or 
rose slightly, participation rates increased. This does not mean that students are price-insensitive 
– indeed, as the cost gap between public and private universities has widened, so too has publics’ 
share  of  total  enrolment.  But  changes  in  the  basic  fee  to  access  universities  –  such  as  the 
significant  and  sudden  shifts  in  tuition  in  1995,  1996  and  2003  –  had  no  visible  effect  on 
enrolment. 

A  third  question  is  “how  have  increases  in  private  funding  affected  the  composition  of  the 
student body”? This is not a question which can be answered well due to a scarcity of data. It is 
evident that the Portuguese higher education system is socially stratified, but there is no evidence 
which would suggest that tuition is a cause. We know that female share of overall participation 
rates have fallen every year since 2004, but there is no obvious reason to link this data with fee 
policies. 

Finally, the Portuguese system does not systematically capture data on student success, so there 
are no data on which to base any conclusions with respect to completion rates. 

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5.  HYPOTHESIS D: INCREASING PRIVATE FUNDING 
AFFECTS STUDENT CHOICE OF HOW OR WHAT TO 
STUDY 

This  chapter  looks  at  data  relevant  to  Hypothesis  D,  which  states  that  as  private  funding 
increases,  costs  increase  to  students  and  their  families,  which  in  turn  will  have  an  impact  on 
students’ choice of how and what to study. Accordingly, this section looks at these topics: have 
student age, location or field of study and time to completion changed over time in relation to 
cost-sharing? 

5.1  Student Study Patterns  

As noted earlier, Portugal only records students as studying full-time, so this is not an issue that 
can be addressed.  

5.2  Location of Study  

One  hypothesis  about  the  effects  of  tuition  is  that  they  make  it  more  difficult  for  students  to 
study away from home. As costs rise, so the theory goes, less money is available for other living 
costs and so students become more likely to stay at home in order to economise. 

Based on data from the 2005 and 2010 EUROSTUDENT studies, it certainly does seem to be the 
case  that  there  has  been  a  major  recent  shift  in  study  locations.  Between  2005  and  2010,  the 
proportion of students living away from home fell by over 40%. In the case of students at private 
institutions, one might try to construct a case that rising tuition was the cause; however the fact 
that a similar fall was seen at public institutions where net average tuition was falling makes that 
a  hard  case  to  sustain.  More  likely,  the  change  is  due  to  families  trying  to  save  money  in 
response to the country’s austerity crisis. 

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Figure 5.1: Proportion of students living away from home (2005 and 2010) 

45% 

29% 

50%

40%

30%

20%

10%

0%

43% 

25% 

24% 

11% 

Public

Private

All students

2005

2010

Source:Cerdeira et al 2011. 

5.3  Field of Study  

One hypothesis that is frequently advanced about the impact of fees is that to the extent that fees 
vary  across  fields  of  study,  they  may  induce  students  to  move  towards  ‘cheaper’  subjects  and 
away from (potentially) more valuable subjects that happen to be more expensive.  

This hypothesis cannot be tested in Portugal. First of all, at the undergraduate level, institutions 
do not charge variable amounts, meaning that there are no ‘cheap’ subjects. Second, as shown in 
Figure 5.2, there does not appear to have been any changes to the relative returns between broad 
fields of study, meaning that there are no external economic changes which might have caused 
students to shift fields of study. And finally, as was shown in Chapter 3, there was little in the 
way of significant enrolment changes, either. 

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Figure 5.2: Monthly incomes of recent graduates, by field of study and year 
(2002, 2006, 2009) 

 1 600 €  
 1 400 €  
 1 200 €  
 1 000 €  
 800 €  
 600 €  
 400 €  
 200 €  
 -   €  

2002

2006

2009

Source: Cardoso et al 2012. 

5.4  Time-to-Completion  

As noted earlier, there are no data available with which to answer this question. 

5.5  Evaluation 

Hypothesis D suggested that rather than having an absolute effect on the level of participation, 
the liquidity issues that stems from increased tuition levels may lead to students switching to a 
different  mode  of  delivery  that  enables  them  to  study  while  working  and  earning  income,  or 
delay participation so as to work to save money before entering higher education. Specifically, 
there are four sub-hypotheses about the potential impact of higher tuition, which were examined 
above:  

First, with respect to ‘how’ students study, one has to note that Portugal only records students as 
being  full-time.  To  the  extent  this  is  in  fact  true,  it  disproves  the  hypothesis;  to  the  extent  it 
masks some students who are actually studying part-time, the actual effect is unknowable. 

Second,  with  respect  to  whether  increases  in  private  funding  have  affected  students’  choice  of 
study  location  in  terms  of  where  within  a  country  they  choose  to  study,  there  has  been  an 
enormous  shift  between  2005  and  2010.  However,  this  appears  to  be  a  result  of  the  economic 
crisis, not fees. 

Third,  with  respect  to  whether  increases  in  tuition  have  affected  what  students  study,  as  was 
noted  earlier,  there  do  not  appear  to  have  been  many  significant  changes  in the  main  fields  of 

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study enrolment over the period investigated, so it is difficult to conclude that tuition has caused 
any changes.  

Fourth, with respect to increases in fees making students more efficient and taking less time to 
complete their education, there are no data available on which to test this proposition.  

In sum, though the data are admittedly limited, the increase in tuition fees in Portugal appears not 
to have had any effects on study mode, study timing or choice of field of study.  

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6.  CONCLUSION 

With respect to Hypothesis A, it can be asserted that cost-sharing likely increased total funding 
to higher education, but the size of the increase was small. 

With respect to Hypothesis B, it is difficult to say that much has changed in Portugal as a result 
of policy changes in the period of interest. There have been some changes in behavior, but some 
of  them  were  due  to  actions  other  than  institutions  (e.g.  changes  in  governance,  which  were 
legislated  by  government)  and  few  seem  to  be  directly  related  to  the  issue  of  fees  and  cost-
sharing. 

With  respect  to  Hypothesis  C,  the  data  are  mixed.  Increases  in  fees  at  public  institutions have 
been minimal; increases at private institutions have been more substantial. This may have led to 
some switching between sectors, but there is no sign that this situation has deterred participation 
at all, as it continues to rise steadily. There is too little data about changes in the socio-economic 
composition of the student body to make a useful judgement on the effects of tuition fees in this 
respect.  

Finally, with respect to Hypothesis D, though the data are admittedly limited, the rise in tuition 
fees in Portugal appear not to have had an adverse effects on study mode, study timing or choice 
of field of study.  

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REFERENCES 

Cerdeira, L. (2008). O financiamento do ensino superior português : a partilha de custos. 

Universidade de Lisboa. Retrieved from http://hdl.handle.net/10451/973 

Cerdeira, L., Cabrito, B., Patrocínio, T., Brites, R., & Machado, L. (2011). Colóquio QUANTO 

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